How To Apply For a Short Term Loan

Applying for a short-term loan isn't difficult, but the key is to try to make it as cost effective as you can. A short-term loan is a type of financing that allows you to get a lump sum of cash as long as you're prepared to repay it within months or one year.

Short-Term Loan: At-a-Glance

• Definition: With a short-term loan, you can get a lump sum of cash as long as you repay it within months or less than a year.

• Loan amounts: Typically capped at $2,000

• Funding speed: Typically instant

• Best for: Small unexpected expenses like medical bills, house or car repairs

• Pros: Quick approvals, fast cash for those with poor credit, debt is quickly cleared because of short repayment terms

• Cons: APRs can be exceedingly high, frequent payments can cause debt strain and you can be stuck in a debt trap

Key Takeaways

• Short-term loans deliver fast cash for emergencies like medical bills or car repairs, with funding often arriving the same day or within one to two business days. Loan amounts typically cap at $2,000 and must be repaid within 12 months.

• Costs vary widely by loan type. Payday loans can hit nearly 400% APR, while credit union PALs cap at 28%, online personal loans run 6% to 36% and Instacash® charges 0% APR with optional instant-transfer fees.

• Compare lenders before you apply. Prequalify with a soft credit check, confirm there are no prepayment penalties and choose the lowest-cost option you qualify for to avoid a debt cycle.

Summary generated by AI, verified by MoneyLion editors

How Do You Apply for a Short-Term Loan?

Applying for a short-term loan is easy. Here's how to approach it and how much time each step will take:

1. Decide how much you need. Evaluate the amount you need to cover your expenses. This should take five to 10 minutes at most.

2. Compare lenders and loan types. Research prospective lenders and different loan types that may be the best fit for you. Researching lenders may take 15 to 30 minutes. Check eligibility or prequalify. You can try to prequalify for each lender. This could take 10 minutes for each lender. Prequalifying doesn't harm your credit.

3. Gather your documents. You should gather all your documents. Depending on how accessible these documents are, it could take up to 10 to 15 minutes.

4. Submit your application. Submitting the application online or in person should take 10 to 20 minutes.

5. Verify your information. Double-check the information you entered into the application.

6. Get approved and receive funds. You should be able to receive your funds on the same day or within one to two business days.

7. Plan your repayment before the due date. Know when your due date is and plan to make your payment timely.

What Do You Need to Apply for a Short-Term Loan?

Do you meet the requirements to apply for a short-term loan? Here’s a checklist:

• Be 18 or older

• Government-issued ID

• SSN or ITIN

• Proof of income (pay stubs, bank deposits, etc.)

• Active bank account

• Contact info

• Steady income or employment

What Is a Short-Term Loan?

A short-term loan is an unsecured personal loan when you borrow a lump sum of cash from a lender. You must repay the amount within 12 months. Typically you take a short-term loan for emergencies like a medical bill or car repair.

What Are the Types of Short-Term Loans?

1. Loans from Traditional Banks

• Typical cost: 6% to 24%

• Funding speed: Two to seven business days

• Loan amount range: $1,000 to $50,000

• Credit check type: Hard check

• One key risk: Borrowers with lower credit scores may be declined since credit restrictions are strict.

2. Payday Loans

• Typical cost: Almost 400%

• Funding speed: Same day or next business day

• Loan amount range: $100 to $1,000

• Credit check type: None

• One key risk: Interest rates are exceedingly high so you could be trapped in a debt cycle.

3. Online Personal Loans

• Typical cost: 6% to 36% plus origination and late fees

• Funding speed: Same day to three business days

• Loan amount range: $1,000 to about $50,000

• Credit check type: Soft check to prequalify/hard check once you apply

• One key risk: If your credit score is low, you may have to pay higher APRs

4. Credit Union PALS

• Typical cost: Capped at 28% APR

• Funding speed: Same day or next business day

• Loan amount range: Up to $2,000

• Credit check type: Soft

• One key risk: Short repayment period

5. Credit Builder Loans

• Typical cost: 6% to 16%, plus set-up fees

• Funding speed: 1 to 7 days — funds are held in a savings account until the loan is repaid

• Loan amount range: $300 to $1,000

• Credit check type: Soft

• One key risk: You don’t get instant access to funds

6. Instacash®

• Typical cost: No APR but with instant delivery you'll pay fees

• Funding speed: 1 to 5 business days is no cost; Instant is available with a fee

• Loan amount range: $50 to $500; With RoarMoney up to $1,000

• Credit check type: None

• One key risk: Fees can add up

Compare Short-Term Loan Options

MoneyLion Products

Instacash is a 0% APR cash advance and not a loan. There's no credit check or report to the credit bureaus. Funding can happen within one to five days, or with a Turbo* fee you can get cash instantly.

Credit Builder Plus

With a Credit Builder Plus you sign up for a MoneyLion Credit Loan Plus membership, and you can get a loan of up to $1,000. Plus, you'll have access to a portion of the loan proceeds — maybe even all of it, depending on your finances — right away. You pay an APR from 6% to 30% depending on your credit.

The remainder of the funds is held in an interest-bearing Credit Reserve Account and released when the final payment is made. MoneyLion reports account activity to all three credit bureaus — Experian, Equifax and TransUnion – so you can receive the benefit of a higher credit rating across the board.

Costs and Fees

To understand how much you may pay, here are a few real-world examples of how a payday, credit builder plus and Instacash option may work.

Payday

You borrow $300 and the typical fee is $15 per every $100. You’ll owe $345 in two weeks. That’s a 15% fee in two weeks with a 400% APR.

Credit Builder Plus

You pay a monthly membership fee of $19.99 for one year, and the total yearly membership cost is $240. If you take out a $500 loan at 15% APR, you’ll pay $40 to $60 in interest. Your total cost for the loan is the membership fee plus the interest, which is a total of $280 - $300.

Instacash

You take an advance of $100 and pay 0% APR. Your total repayment would be $100 if you don’t elect to do an expedited fund transfer.

One Early Payoff Example

If you have a $5,000 loan at 15% APR over three years, you’ll pay $1,200 interest total. If you pay it off early in 1.5 years, you pay $600 interest and save $600 in interest.

Are There Any Benefits To Short-Term Loans?

Short term loans offer a several distinct benefits to cash-strapped consumers. 

You Can Get Fast Cash

Most lenders offer same or next-day funding. So, you won't have to fill out mountains of paperwork only to sit around for days waiting for a loan officer to approve or deny your application. You can apply in minutes, receive an instant decision and get cash in your hands fast.

If you’re approved and accept the loan terms, you could have cash in your account by the close of business or the next business day. 

Less Interest Paid – Sometimes

Loans with lengthy repayment periods may seem like a better deal, mainly if the monthly payment is low. However, an extended loan term also means that the lender has more time to collect interest from you. With a short term loan, the repayment period won’t span beyond one year thus, paying less in interest if you make larger payments. 

However, there are some short-term lenders that can still take advantage of consumers who have less than perfect credit and who may not have considered the cost of their loans. Sometimes, borrowers don't even have the option of paying fees — they’re either charged them or not paid at all.

One option to avoid exorbitant short-term rates is to know your rights as a consumer. You can explore options such as a credit union or a MoneyLion Credit Builder loan up to $1,000 with competitive interest rates.

Always ask the lender before signing on the dotted line to confirm you can pay off the loan early without incurring prepayment penalties. 

It's Easily Accessible

If you're at least 18 years of age with a steady source of income, you shouldn’t have trouble finding a short term loan. The lower your credit score, though, the more you’ll pay in interest if the lender uses your credit rating to determine the loan terms. 

Several lenders offer no-credit-check short-term loans. They often have a high interest rate since the lender is assuming more risk. The good news is that they’re unsecured and are far more appealing than secured loans that require collateral. This means you won’t lose your home, car, or other valuable possession if you’re unable to repay the loan.

Grace Kilander contributed to the reporting for this article.

Key Terms

• Short-term loan: A short-term loan gives you a lump sum of money that you usually repay within 12 months, often for emergency expenses like car repairs or medical bills.

• Annual percentage rate (APR): APR shows the total yearly cost of borrowing, including interest and certain upfront fees, expressed as a percentage.

• Payday loan: A payday loan is a small, high-cost loan that’s usually due on your next payday and can be hard to repay without borrowing again.

• Soft credit inquiry: A soft credit inquiry is a credit check used for things like preapproval that does not affect your credit score.

• Hard credit inquiry: A hard credit inquiry happens when you formally apply for credit and it can lower your credit score by a few points.

Sources:

• Consumer Financial Protection Bureau: What is the difference between a loan interest rate and the APR?

• Consumer Financial Protection Bureau: What is a payday loan?

• Consumer Financial Protection Bureau: What is a credit inquiry?

Summary generated by AI, verified by MoneyLion editors