Even if you have a little cushion in your budget, covering an unexpected expense like pricey car repairs or emergency medical care can be very challenging.

In that situation, a short-term loan may make sense. A short-term loan is typically an unsecured loan (meaning it doesn’t require collateral) that you must repay within a couple weeks to one year. You can also find loans with longer repayment terms of up to six years.

Short-term loans can be dangerous, especially if they have high interest rates and borrowing limits. Before you apply for a loan, make sure you understand the loan details and select a reputable lender.

What are short-term loans?

Short-term loans can be a valuable financial tool to address various expenses. These loans are a common option for people and businesses that don’t qualify for a traditional personal loan with a longer repayment term (two to five years or more). 

You’ll typically need a stable income to qualify for a short-term loan. Many personal loan lenders approve borrowers with bad credit, but a higher credit score will land you a lower interest rate.

Lenders typically make a same-day decision on your short-term loan applications, often within an hour or so. Once approved, you’ll receive your interest rate and repayment term. If you agree with the terms, the lender can usually deposit the funds in your bank account within 24 hours of your loan approval.

Be wary: Some short-term loans — like payday loans and pawnshop loans — are especially risky. While some short-term loans have higher interest rates, they pale in comparison to payday loans, whose exorbitant interest rates and fees can equal an annual percentage rate (APR) of 400%. 

Plus, payday and pawnshop loans are usually due in full with your next paycheck. If you can’t repay the loan by then, you risk falling into a debt cycle that can be difficult to escape.

Best short-term loan lenders

If you want a short-term loan, your best bet is to stick with reputable lenders and only consider loans you can comfortably repay within the designated term.

Below are four Credible partner lenders that provide short-term personal loans, as well as loans with repayment terms ranging from one to six years.

The benefit of a longer repayment term is your monthly payments will be lower. However, you’ll pay more interest over the life of the loan with a longer term.

PenFed

Best for: Very small and very large loan amounts

A short-term loan from PenFed Credit Union can give you access to significant funding for a large expense, but they also offer small loan amounts. Just be aware that funding can take from two to four business days after verification.

Minimum credit score: 660

Loan amounts: $600 to $50,000

Loan terms: 1 to 5 years

Avant

Best for: Borrowers with fair credit

Avant offers a smooth online application and approval process (with funding times as soon as the next business day), but the lender does charge an administration fee of up to 4.75% to process your loan.

Minimum credit score: 550

Loan amounts: $2,000 to $35,000

Loan terms: 2 to 5 years

LendingPoint

Best for: Paying off your loan early

With fair credit, you might qualify for a personal loan for just about any purpose, and you can get an APR discount for enrolling in autopay.

Minimum credit score: 580

Loan amounts: $2,000 to $36,500

Loan terms: 2 to 6 years

Best for: Longer repayment terms

OneMain Financial

Best for: Both unsecured and secured loan options

OneMain Financial offers short-term personal loans to borrowers with less-than-perfect credit. The lender offers both secured and unsecured loans, potentially making it easier to get approved. 

Minimum credit score: Undisclosed

Loan amounts: $1,500 to $20,000

Loan terms: 2 to 5 years

Related: Learn more about getting a personal loan on Credible.com

Other personal loan lenders to consider

Shopping around and comparing offers from multiple lenders can help you identify the best loan to suit your needs. The following two lenders are not Credible partners.

Oportun

Best for: Very small loan amounts

Minimum credit score: Undisclosed

Loan amounts: $300 to $9,000

Loan terms: 9 to 49 months

PNC

Best for: No fees

Minimum credit score: Undisclosed

Loan amounts: $1,000 to $20,000 ($10,000 in CA)

Loan terms: 6 months to 5 years

Related: Learn more about getting a personal loan on Credible.com

Methodology

Credible evaluated the best personal loan lenders based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, and fees. Credible’s team of experts gathered information from each lender’s website, customer service department, and via email support. Each data point was verified to make sure it was up to date.

More places to find short-term loan lenders

You can also expand your search to include in-person options. While online lenders often provide a more streamlined application and funding process, you can also find a short-term loan through a bank or credit union.

• Banks: Loan amounts, repayment terms, and interest rates vary between banks. These days, you can apply for a loan online or visit your local branch and meet with a loan agent for assistance.
• Credit unions: These not-for-profit organizations are owned by their members, which means you can typically get a lower interest rate than you would with a traditional bank. However, you’ll usually need to be a member (or become one) to get a loan. 

How to qualify for a short-term loan

Every lender has unique eligibility criteria for short-term loans. You’ll typically need to be at least 18 years old and have a valid government-issued ID. Other common requirements for a short-term personal loan include:

• Good credit: Your credit score indicates your likelihood of repaying your loan on time. Typically, you’ll need a FICO Score (a type of credit scoring model) of at least 670, but a higher score will improve your approval odds and help you qualify for lower interest rates.
• Verifiable income: To ensure you have sufficient income to repay a new loan, personal loan lenders want to see your recent pay stubs or tax records as proof of income. Most lenders have minimum income requirements, which can vary. For example, the minimum income you’ll need for a personal loan with LendingPoint is $35,000 per year.
• Low debt-to-income ratio (DTI): Lenders review your debt-to-income ratio to gauge your financial ability to take on a new loan payment. Your debt-to-income ratio measures your total monthly debt payments against your monthly income. Lenders typically prefer a DTI of 36% or less, meaning your monthly bill payments account for 36% or less of your monthly income.

What to know about short-term loans

Comparing short-term loan offers is an effective way to discover your loan options and see which loan is best suited to your needs. Here are some loan factors to consider as you compare your short-term loan options:

• Eligibility: It’s important to consider a lender’s eligibility requirements to avoid applying for a loan you don’t qualify for. Be sure to find out the lender’s credit score and income requirements. If you’re unable to find this information on the lender’s website, contact them directly.
• APR: The annual percentage rate (APR) is the yearly interest you’ll pay on the loan, plus any fees. The APR will give you a better idea of the cost to borrow money than the interest rate alone. As of November 2022, the average APR for a 24-month personal loan was 11.23%, according to the Federal Reserve.
• Repayment term: Short-term loans typically have repayment terms of two weeks to one year, but you can find loans with repayment terms up to six years. You can use a personal loan calculator to calculate your monthly payment for different repayment terms. 
• Fees: Not all lenders have fees, but you should find out before you accept a loan. Many lenders charge an origination fee, which is an upfront fee between 1% and 6% of your loan amount, for processing your application. You may also come across an application fee, prepayment penalty, and late fees.
• Time to fund: If you need the money quickly, make sure the lender will disburse your funds within your time frame.

How to apply for these loans

The process to secure a short-term loan is relatively simple. You’ll generally need to  follow these steps:

1. Shop around and compare multiple lenders. Research several lenders and identify the best offers by comparing each lender’s interest rates, repayment terms, loan amounts, and fees. Many online lenders allow you to easily prequalify before applying, which won’t affect your credit score.
2. Select the best offer: Review your offers and choose the best loan option to address your needs. If you’re not approved for a loan, you might consider adding a co-applicant to your loan.
3. Submit an application and any required documents: Enter your personal information, including your contact information, income, and employment history. Be prepared to submit documents that verify the information you provide.
4. Receive your funds: If the lender approves your application, you can sign to receive your loan funds. Lenders typically make one lump-sum deposit directly into your account, which can take anywhere from one to five business days. However, some lenders offer same-day funding.

Pros and cons of short-term personal loans

Short-term personal loans can help you access the cash you need, but they’re not for everyone. As with any financial product, it’s wise to weigh the pros and cons before coming to a decision.

Pros 

• Fast approval times and funding: Many online lenders can approve your loan the same day, often in a few minutes, while others can take one to five business days.
• No collateral required: With an unsecured short-term loan, you don’t have to offer up your home, car, or another asset as security on the loan.

Cons 

• Good credit required: In most cases, you’ll need a credit score of at least 670 to qualify for a personal loan, but the higher the score, the better.
• May not meet eligibility criteria: Without collateral to reduce the loan risk, lenders may impose more stringent requirements than other financing options. If you don’t qualify, you won’t be able to get a loan.
• Shorter terms add risk to your repayment: It’s important to understand that shorter repayment terms will mean higher monthly payments. If you’re unable to afford the payments, you could find yourself trapped in a cycle of debt.

Alternatives to short-term loans

If you don’t want to take out a short-term loan, you may wish to explore other options, such as:

• 0% APR balance transfer credit card: With a balance transfer credit card, you transfer your credit card balances to a new card to simplify the repayment process. Some credit card issuers offer balance transfer cards with an introductory APR of 0% for a specific period, which means you could pay off your balance during that time without paying any interest. Just keep in mind that if you don’t repay that balance during the introductory period you’ll be subject to the card’s regular interest rate, which could be high.
• Personal line of credit: A personal line of credit is similar to a credit card. In both cases, you withdraw the amount you need up to your balance limit. This option may save you in interest charges, since you only pay interest on the amount you borrow.
• Payday and pawnshop loans: These lending options exist because many people need fast access to cash. However, you should avoid these types of loans if possible because of their astronomical interest rates — which can be up to 400% — and their propensity to trap you in a cycle of debt.

Related: Learn more about getting a personal loan on Credible.com