4 Short-Term Loans: Personal Loans With No Prepayment Penalty

short-term personal loans
short-term personal loans

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This article first appeared on the Credible blog.

A short-term loan is typically a loan with a repayment term of one or two years. This type of loan could be helpful if you need to quickly borrow a small amount of cash.

If you’re looking for a personal loan, Credible can get you started. Credible makes it easy to compare personal loan rates from multiple lenders. It’s 100% free and won’t affect your credit.

Here’s what you should know about getting a short-term loan:

4 short-term personal loans

An online lender can be a good option for a short-term personal loan. Here are four Credible partner lenders that offer small personal loans with terms starting at one or two years.


Keep in mind that none of these lenders charge prepayment penalties, meaning you could pay off your loan even earlier at no extra cost.

  • Avant

  • LendingPoint

  • OneMain Financial

  • Pen Fed Credit Union

Where to find a short-term loan

Outside of online lenders, here are a few other places to find short-term loans:

  • Banks often offer personal loans, though the available amounts and repayment terms vary. Keep in mind that you might have to be an existing customer to borrow from a particular bank.

  • Credit unions are not-for-profit organizations — as such, they sometimes offer lower interest rates than banks. You’ll need to be a member of the credit union to take out a loan.

  • Payday lenders offer small loans that you’ll have to repay by your next payday. However, payday loans can come with interest rates and fees that equate to an APR ranging from 300% to 500% — meaning they should be a last resort.

  • Pawn shops also provide small loans for those who can offer an item of value. If you pay back the loan, you’ll get your item back — if not, the pawn shop can sell it. Like payday loans, pawn shop loans can come with astronomical interest rates and fees and should be avoided if at all possible.

How to apply for short-term loans online

If you’re ready to take out a short-term loan online, follow these four steps:

  1. Shop around and compare online lenders. Be sure to consider as many lenders as you can. This way, you can find the right loan for your needs. Remember to check not only rates but also repayment terms and any fees the lender charges.

  2. Choose the loan option you like best. After comparing lenders, pick the loan option that works best for you.

  3. Fill out the application. At this point, you’ll need to complete a full application and submit any required documentation, such as tax returns or pay stubs.

  4. Get your funds. If you’re approved, the lender will have you sign for the loan so it can send you the money — generally through direct deposit. The time to fund for a short-term personal loan generally ranges from one business day up to a week, depending on the lender.

Before you borrow, it’s also a good idea to consider the total cost of a loan over time. You can estimate how much you’ll pay for a loan using Credible’s personal loan calculator. Credible makes it easy to compare personal loan rates from various lenders, without affecting your credit.

How to qualify for a short-term loan

While each lender has its own requirements, here are a couple of things you’ll typically need to qualify for a personal loan with a short term:

  1. Good credit: A credit score of 700 or higher is typically considered good. Lenders use your credit history to determine your eligibility as well as your loan terms. While some lenders are willing to work with borrowers who have poor credit, you’ll generally need good to excellent credit to qualify for the lowest interest rates.

  2. Verifiable income: Lenders want to see that you can afford a new loan in addition to any other debt you might have.

If you’re ready to take out a short-term loan, remember to consider as many lenders as you can — you might get better terms with one lender versus another. With Credible, you can easily compare your prequalified rates from multiple lenders in two minutes.

How to get a short-term loan with bad credit

Payday or pawn shop loans can be tempting if you have bad credit because they don’t require a credit check.

However, a short-term personal loan is almost always a better option. While some personal loan lenders have stringent credit requirements, others offer loans for bad credit that could be easier to qualify for.

Another option for getting a short-term loan with bad credit is applying with a cosigner who has good credit. Not all personal loan lenders offer cosigned personal loans, but some do.

Even if you don’t technically need a cosigner to get approved, having one could help you qualify for a lower interest rate than you’d get on your own.

Keep in mind: Taking out a new loan — including a short-term loan — could have a small effect on your credit score. If you apply for a loan, the lender will perform a hard credit check to determine your eligibility, which could lower your score. However, a hard credit inquiry typically only reduces your score by five points or less and only remains on your credit report for two years. In many cases, your score will bounce back within a few months.

Other short-term loans

Short-term loans aren’t your only option for borrowing cash quickly. Here are a couple of alternatives to consider:

  1. Personal line of credit: Unlike a personal loan, a line of credit gives you continuous access to a credit line that you can repeatedly draw from and pay off. If you’re considering a personal line of credit vs. personal loan, keep in mind that a personal line of credit could give you easier access to cash in the future should you need it.

  2. Credit card: A credit card is another type of revolving credit. Some credit cards also come with 0% APR introductory offers. If you can afford to repay your balance by the time this period ends, you won’t have to pay any interest — which could make a credit card a better choice than a line of credit. However, if you can’t pay off the card in time, you could be stuck with some hefty interest charges.

If you decide to take out a short-term loan, remember to shop around and consider as many lenders as you can. This way, you can find the right loan for you. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.

About the author: Lindsay VanSomeren specializes in credit and loans. Her work has appeared on Credit Karma, Forbes Advisor, LendingTree, and more.