What Are the Best Short-Term Loan Options?

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When you aren’t in a great place financially, it’s easy to feel stressed and anxious all the time. Add to that an emergency situation that requires money then and there, and you’ve got a recipe for financial trouble. Because money is so crucial to our survival, it’s easy to understand why people might jump at the opportunity to take out a loan without thinking twice when emergencies arise.

Just because you need the money quickly doesn’t mean it’s a good idea to rush into signing a loan agreement. Take some time to do your research. Make smart choices now about your finances so that you won’t be regretting things later.

There are all sorts of loans out there, but for the purpose of addressing emergency situations and needing cash on hand quickly, we’ll be discussing short-term loans. Specifically, we’ll look into the best short-term loan options you have and suggestions for how to make the right choice for you. First, let’s take a look at what short-term loans are and some commonly asked questions about them.

Short-Term Loans

Short-term loans are loans scheduled to be repaid in less than a year—most typically within 30 days. They are usually easy to acquire as an online loan from online lenders, through credit unions or a bank.

When applying for a short-term loan, lenders will need to see proof of a source of income at the very least. Beyond that, some lenders may want to see a good or decent credit score before they will give you the loan. If you’re worried that your credit score isn’t good enough, don’t be; short-term loans for bad credit exist as well.

What to Look for in a Short-Term Loan

Short-term loans are not inherently bad. What can be bad is signing up for one without any knowledge of how the loan works or without having a plan in place to pay it back quickly.

With that in mind, let’s take a look at some things to keep in mind when you are considering applying for a short-term loan.

Know the Costs

Be aware that quick cash will cost you. With higher than average interest rates, you might find that you’ll be paying back close to double the amount you originally borrowed on the loan. Consider that before making the choice: Will the payoffs be worth the cost?

Choosing to take out a short-term loan could limit your borrowing ability in the interim. Even if you can afford it with no stress or strain, you might not be able to maneuver other financial commitments until you pay the loan back.

In addition, take the time to read over the fine print attached to the loan. When it comes to matters of money, knowing the details is vital. The best short-term loans will have fewer fees and lower interest rates and be clear about their fine print.

Secured or Unsecured Loan?

A secured short-term personal loan uses a possession as collateral (usually your home or car). This type of loan isn’t a short-term access to cash; it’s a more long-term money borrowing situation. An unsecured loan has no collateral, lasts for a year or more, and comes with a fixed interest rate.

An unsecured loan will be more risky for a lender because there is nothing of monetary value backing it up and securing it. If you as the borrower fail to repay the money, the lender won’t be able to claim anything to recoup their losses. Subsequently, an unsecured loan will be more expensive. The best short-term loan for you and your situation will take into account what you can and can’t offer as collateral and adjust accordingly.

When Will You Pay the Loan Back?

Thanks to interest rates—whatever their level—the longer you take to pay the loan back, the more money you’ll end up paying. If you don’t go into taking out a loan with a set plan in place to repay it, you might find yourself worse off than you were before.

You’ll be expected to make regular payments on a short-term loan anyway, but if you’re only making the minimum payments each month, you’ll be paying mostly interest. You’ll need to have a plan in place for the monthly amount you pay that will work toward paying off the actual loan and not just its attached fees and interest rates.

The sooner you can pay the money back, the better. You’ll accrue less interest and be relieved from that debt hanging over your head. The best short-term loan options won’t try to trick you with additional fees and monthly payments that only include the interest.

Getting a Lower Interest Rate on a Loan

Your credit score can be vitally important to the interest rate you are charged on a short-term loan. The best short-term loans will give you lower interest because of your good credit score.

Lenders like to see potential borrowers with good credit scores because it indicates that you are likely trustworthy and able to pay off your debts. You can work to improve your credit score by staying on top of your credit card and other loan payments.

Best Short-Term Loan Options

What is considered the best short-term loan option for one person might not be the best option for the next. Take a look at the following types of short-term loans to see what options exist, and discover which ones might make the most sense for you.

Personal Lines of Credit

A personal line of credit is similar to a credit card, just without a grace period or rewards. It does, however, come with better cash advance features. Lines of credit are more commonly used among businesses where credit cards are used more with individuals.

This type of short-term loan gives you a set amount of money to be borrowed at any time you need it. You can borrow part, half, the whole amount, or anything in between, depending on your monetary needs at a given time. Personal lines of credit are offered through banks, and only then to individuals or businesses with good credit.

Unsecured or Personal Short-Term Loans

With an unsecured or personal short-term loan, lenders won’t need much more than your signature to give you the money (which can range from smaller amounts of $1,000-$2,000 up to around $100,000). This type of loan comes with a fixed interest rate and regular payments or installments that you meet each month.

It’s likely that you’ll need a good credit score to qualify for this type of loan as well. If you have poor credit, your interest rates on the loan will be higher, or you might not be approved for the loan at all.

Loans for College

College is expensive. Many universities and colleges have short-term loan options for their students who face unexpected expenses or won’t quite be able to pay rent for the month. The loan amounts and interest rates will vary on these types of short-term loans, but you must be a currently enrolled student to qualify.

Payday Loans

Payday loans often come with very high interest rates and subsequently tend to be used to borrow smaller amounts of money. Known as cash advance loans, these types of short-term loans get the borrowers their money almost right away and require it to be paid back in a lump sum very soon thereafter—typically by the next paycheck.


Most mortgages last 15 to 30 years; however, you can get a mortgage on a house for as little as half a year to five years. That short of a mortgage qualifies as a short-term mortgage. Most people will choose a short-term loan on a home because the interest rates are lower; those opting for a long-term mortgage will likely have much higher interest rates to consider.

Your Short-Term Loan Options

When considering short-term loan options, be sure to ask the right questions and have a plan in place for paying it back. Different types of short term loans apply to different situations. Once you understand your situation and particular needs, you’ll be able to know what type of short-term loan you need, what types of interest rates you should expect, and how long it will take you to pay it off.

Short-term loans aren’t necessarily a bad thing. If you know more about them, you’ll be in a position to use that knowledge to your advantage.

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