What Can You Use A Short Term Personal Loan For?

Personal Finance

What Can You Use A Short Term Personal Loan For?

January 9, 2023

An unforeseen expense, such as a car repair or medical condition, can put you in a challenging financial position.

If you need cash quickly but don’t know how to get it, a short term personal loan could be the answer.

Personal loans paid over a short period are known as short-term loans. As long as you have a regular source of income, you should be able to qualify. As such, they can be useful for business and personal needs.

Find out if you should opt for a short term personal loan, as well as what to look out for in this article.

What Is A Short Term Personal Loan?

One key distinction between short-term and long-term loans is that the former is typically repaid in a limited period.

The payback period for a short term personal loan is typically less than a year. A short-term loan is a straightforward loan and suitable for those with temporary financial crises. They are also a practical option for small businesses that aren’t eligible for bank loans.

A short term personal loan ranges from $500 to $35,000. The interest rate for short-term loans is often higher than that of longer-term loans.

Being quick financial fixes, short-term loans from licensed money lenders are processed in about 24 hours. Licensed money lenders place more emphasis on your annual income than your credit score.

The interest rate on your short term personal loan will be determined in part by your credit history and other factors.

What Can A Short Term Personal Loan Be Used For?

There are a few ways you could put your short term personal loan to use. Here are a few ways.

For Loan Repayments

A short term personal loan may be a good option if you have accumulated a lot of high-interest debt.

For example, you can use that money to pay off your credit card bills and get a fresh financial start. But only borrow what you can afford to pay back.

Miscellaneous Expenses

The flexibility of a short term personal loan is a big plus. Here are some ways you can use the money:

  • Food and groceries
  • Rent
  • Utility bills
  • Personal upkeep
  • Home or vehicle repairs
  • Medical bills
  • Travel expenses

Interest Rates Of Short-Term Personal Loans

Personal loans with short repayment terms can seem like a lifesaver in times of need, but they often become rather expensive. Remember that short-term personal loans have much higher interest rates than long-term loans.

The interest rate of your short-term loan is dependent on the following factors:

Financial Institution

The interest rate of a personal loan will depend on the lender you’re dealing with.

Licensed money lenders charge a monthly interest rate of 4% on personal loans. Banks often charge lower interest rates, but are likely to take longer to approve your application.

Processing Fee

This is a hidden cost that is deducted from the principal amount. As such, it is included in the official interest rate. You should take it into consideration.

For example, if you took a $10,000 loan with a 1% processing fee, you’ll receive $9,900 with $100 deducted as the processing fee. As mentioned, this fee is included in the EIR.

Effective Interest Rate (EIR)

In simple terms, the EIR is the total interest you have to pay on your personal loan. It includes processing fees and factors in your repayment schedule. You should look at the EIR when choosing a loan as it is a better reflection of your interest rate.

Other factors that affect the interest rate of your short term personal loan are your income, credit score, the loan tenure, and loan amount.

What Are The Pros And Cons Of Short-Term Loans?

Short-term loans in Singapore are useful in your time of need. Let’s look at their pros and cons.


Speedy Application Procedure

You can apply for short-term loans online, often the quickest and most convenient way to get such loans. Because there is less bureaucracy and stress, you can complete the process in less time.

Many banks and licensed money lenders now have mobile-friendly websites and apps.

Quick Approval

In Singapore, it’s possible to have your short-term loan approved in 24 hours, or at most a few days.

Quick Payoff

You should get a short-term loan quickly, and pay it off just as quickly if possible. That will help you save on the interest you would have paid had the loan tenure been longer.

Convenient To Access

As earlier mentioned, there are low barriers to entry for short-term loans. They are approved fairly quickly.

Enhances Your Credit Score

You can use a short-term loan to improve your credit score by paying for outstanding loans. This paves the way for you to borrow more money from a lender in future.

Your credit rating will improve if you repay the payday loan on time.


You will get to choose the loan amount, interest rate and repayment structure. Most licensed money lenders allow you to choose whether you want weekly, bi-weekly, monthly, or payday repayments.


Although short-term personal loans might provide you with access to funds fast, they typically come with associated fees. Here are some of their cons:

Higher Interest Rates

The interest rate of a short-term loan is likely to be higher than long-term counterparts because of the short loan tenure.

Unlike long-term loans where you can pay interest for a longer period, you only have a few months to pay interest on a short-term loan. This is why the interest rate is higher.

Risk Of Getting Into A Debt Trap

If mismanaged, weekly payments may increase your chances of defaulting on a loan. You may be forced to apply for more loans to repay what you already owe.

Higher Penalties For Defaulting

The penalties for defaulting on a short-term loan are just as high. This is why some borrowers are forced to borrow again to pay off their short-term loans.

Risk of Defaulting

Choosing a suitable repayment schedule is essential if you want your monthly payments to be manageable.

You may get late fees if your monthly installment isn’t paid on time. Therefore, you must exercise caution while deciding if you prefer weekly, bi-weekly, monthly, or payday repayments.

How Long Should The Loan Tenure Be?

For short-term loans, the typical repayment period is between six to 12 months.

Some lenders of short-term terms don’t specify a schedule or a due date. If so, negotiate for a repayment plan that favours your finances.

It shouldn’t be too short as to stress you out, but neither should you take longer than you need to pay off the loan.

Where To Get A Short-Term Loan

Licensed Money Lenders

There are more than 100 licensed money lenders operating in Singapore. Limits on loan amounts, permitted interest rates, and permitted service costs are all established by the Ministry of Law.

Regardless of whether or not the loan is secured, the maximum interest rate a licensed money lender can charge is 4% per month. This interest rate applies to the unpaid balance.

The same interest rate will be applied only to overdue payments.


You might also inquire about short-term loans from a bank.

You can get short-term loans from banks at competitive interest rates. But the approval process can take weeks or months longer than with a registered money lender.

Your chances of acquiring a bank loan are low if you have a poor credit score. Banks pay more attention to your credit score rather than your income.

Therefore, a bank might not be your best option if you need money immediately.

Private Funders

These aren’t regarded as money lenders nor are they required to operate with a license.

Private funders are allowed to offer short-term financing to corporations and accredited investors.

Here are the requirements:

  • Income earned in the last 12 months should be at least $300,000
  • Net financial assets should exceed $1 million in value
  • Net personal assets of $2 million with the value of the primary residence not exceeding $1 million

Those that meet the criteria above can apply for a short-term loan from private funders. Private lenders may require collateral, which you may forfeit if you default on the loan.

Should You Apply For A Short Term Personal Loan?

It would help if you had a plan for how you will repay the short term personal loan. Consider this even before you even apply for one.

Think about its benefits and drawbacks and explore other options.

If you need a loan, you can find the most affordable repayment plan with the help of Credit Thirty3.

We are one of the most trusted licensed money lenders in Singapore, and have some of the most affordable interest rates and fees.

Give us a call now or apply for a loan today.