5 Go-To Short-Term Loans for Immediate Needs

Short-term loans are credit facilities taken out for a short period to finance a cash shortage and meet other immediate monetary needs. They’re called short-term since they usually come with a tenure of 6-18 months. Long-term loans, however, could last for over 25 years. 

While short-term loans may have higher interest rates, you’ll likely pay a lower total interest percentage since there’s not much time for interest to build up. 

Many cash-strapped borrowers opt for short-term loans as their go-to financing for several reasons. One is that short-term loans are typically unsecured. In other words, lenders won’t require any collateral, which means no hard assets will be seized nor sold off for recovery in case of loan default. 

What’s more, they don’t have a lengthy application process, and that’s why many short-term lenders promise same-day funding too. 

If you’re feeling the pinch and need quick funds for last-minute expenses, listed are the five short-term loans you can apply to. 

1. Payday Loans

If you’re running out of money and your payday is still far away, consider taking a payday loan. It’s called payday since it’s made to help you cover your immediate cash needs until your next set of wages comes in. They’re convenient and quick to access via storefront payday lenders or online, even if you have a bad credit score.

However, payday loans are considered the last resort loan. They’re only small-dollar loans, offering funds for $500 or less. Plus, they should be repaid in a single payment. Even worse, they’re also high-cost loans, which typically charge triple-digit annual percentage rates (APRs). 

2. Personal Loans

Another short-term loan you can use to cover emergencies, unexpected bills, or other financial obligations is a personal loan. However, unlike payday loans, personal loans offer higher loan amounts, ranging from $1,000 to $50,000. 

Their repayment terms are also much longer, usually for 12, 24, 36, 48, or 60 months. Remember that longer repayment periods may lower your monthly installments, which means more interest. 

As its name indicates, personal loans are designed to fund any of your legitimate personal needs. They can be used to consolidate debts, cover costs of moving, pay for medical or funeral expenses, make home improvements, fix or maintain cars, and pay for vacation or wedding costs. However, you can’t use it to fund school tuition, illegal ventures, and gambling. 

3. Pawn Loans

First off, what does pawning something mean? A pawn loan collateral loan taken out at pawn shops. However, the collateral here works differently compared to other secured financing options. First, you’ll have to leave a valuable item at a pawn shop. Then, the pawnbroker will lend you around 25-60% of your item’s resale value. 

The biggest advantage of pawn loans is that you can reclaim your valuables once you pay back what you owe, including its interest. They charge you at least 10% interest on your item, which translates to an annual interest rate of around 120%. If you can’t make repayments on time, the pawn shops can legally seize and sell your items. 

4. Credit Cards

Credit cards are probably the most convenient option when you badly need to purchase something, but momentarily strapped for cash. Its popular use is to buy on credit

Since you can pay for what you bought later, your monthly budget will not be affected. Moreover, you can convert the total amount of your purchases into low-cost equated monthly installments (EMIs), allowing you to repay it conveniently over time. 

Credit cards are considered revolving credit accounts. That means you have ongoing access to the funds so long as your account is in good standing. However, if you can’t pay your outstanding balance in full and on time every month, you’ll face late fees and excessive interest charges, which are higher than personal loans. 

Besides, late payments, alongside high balances and frequent applications, can hurt your credit. 

5. Trade Credit

If you don’t have a credit card but need to buy goods on credit, look for vendors that operate with trade credits. It’s commercial financing where vendors allow you to buy goods without making an immediate payment. 

Instead, vendors will record this transaction through an invoice and give you a fixed period to prepare your payment, usually around 30, 60, or 90 days. 

Like any other financing options, trade credits impose fees and penalties ranging from one to two percent if you make late payments. If you frequently pay every invoice late, your credit score will hit.

Also read: What types of options are available for emergency loans with bad credit

Final Thoughts

While short-term loans guarantee faster approval and funding timelines, take your time learning their loan agreement terms before applying. Such information includes refinancing options, late payment penalties, origination fees, and other applicable charges. 

It’s crucial to know their annual percentage rate (APR). Typically, it’s hard to get a prime rate with short-term loans, so choose lenders with lower interest rates you can afford.