If you need access to cash quickly, a short-term loan can help. A short-term loan can get you out of a financial jam, whether you need money for a medical bill, to get your car repaired, or more. They are designed to help you if you need cash fast, and can’t wait until payday.
It’s important to note that short-term loans can have negative consequences, so be sure to understand how they work, what fees are involved, and what the interest rate is beforehand.
The APR for short-term loans is often much higher than that of normal bank financing. On average, short-term loans have an APR of around 400%. The APR typically ranges from about 390% to 780%. For credit cards and personal loans with standard banks, the APR is a lot lower. For example, the national average APR for credit cards is around 15%.
To give you an example of how APR works with short-term loans, take a $200 loan amount with a loan fee of $30. If you have a repayment term of 12 days, your APR would come out to 456.25%.
How much will my interest rate be?
Your interest rate depends on how much you’re borrowing and for how long. You can get an estimate of the rate and costs using the short-term loan calculator below. Use the slider to select how much you want to borrow and for how long, and you will get an indication of how much you will be charged.
Warning about borrowing
Short-term loans can be expensive, so make sure you absolutely need one before you take it out. The APR is a lot higher for short-term loans than other financing options. APR rates can reach astronomical heights and keep borrowers deep in debt with their payday lenders.
Additionally, many short-term loans have hidden fees and overdraft fees that can add up to over a hundred dollars.
If you are struggling to pay bills, and your debt is piling up, talk to you utilities providers and see if they can work out a payment plan. If you are on government benefits, see if you can receive an advance. For other options that are more affordable, explore our payday loan alternatives guide.
How do payday loan rates differ from other financial products?
Credit cards.Credit card interest rates vary by company and type of credit card. Additionally, credit card rates are variable, while short-term loans are fixed. Credit card APR will also be higher or lower depending on your credit score. The national average credit card APR right now is 15.07%, but of course, can be more or less depending on different factors.
Personal loans.Personal loan interest rates also depend on the lender and if the loan is secured or unsecured. The interest rate for personal loans largely differs by what credit tier you fall under. For example, an excellent credit score would get an average APR of 10.94%, and a good credit score would receive around a 14.56% rate. For average credit, you would most likely get an APR around 19.56%, and a bad credit score would receive an APR of around 28.64%. No-credit-check loans typically have the highest APR, averaging about a 36% APR.
What other fees come with short-term loans?
Short term loan fees vary by lender and state, but generally charge a fixed-fee based on the amount borrowed. You can expect around a $10 to $30 fee for every $100 borrowed. A $15 fee for $100 borrowed is pretty standard; going along with this example, these terms equate to around a 400% APR for a 2 week plan.
The lender will usually outline the monthly and annual fees ahead of time. For late payments or defaults on the loan, you could be charged additional fees. Making payments on time and paying back all fees is essential, because the lender can take you to court otherwise.
Factors to consider in addition to the interest rates
Be aware of how long will it take for the loan amount to transfer to you, and make sure the turnaround time will meet your needs as a borrower.
Make sure the company is easy to contact, and lists a phone number and email address. It is also convenient if the company offers a live chat feature. Being able to reach the company is helpful in case you have problems with repayments, or need to ask a question.
Look for a lender that lists out loan information clearly and is transparent about all of the details. See if you can find information on fees and terms and conditions on the company’s website.
Each lender may vary in the loan amount and term. It is important to find a company that provides the loan details that work best for your situation. Some lenders only offer small loans to new borrowers, while others maybe have repayment amounts that are too expensive to afford.
There are short-term loan lenders that offer additional benefits and features.
Want to apply? Here’s how
First, be sure you know the cautions before borrowing. Think about your personal situation and decide if a short-term loan is the best option for you and your unique circumstances. Look at the term options and if the repayment amounts will be doable for you.
If a short-term loan looks like your best option, make sure to avoid getting multiple payday loans and be absolutely sure you can afford to pay the interest.
If you are interested in applying for a short-term loan, you can compare different lenders available in your state. Once you decide on a lender, you can click “Go to site,” to then be directed over to the lender’s online application form. To be eligible for application, you must be at least 18 years old and be generating income to your bank account.
More about how short-term loans work
Typically, short-term loans range from $100 to $2,000, and on average have around a 2 week term. The loans are also called “payday” loans because the terms and amounts are usually coordinated to your income and how often you are paid from your place of employment.
Short term loans, in general, do not usually help build credit or increase your credit score. If you want to build your credit score, it may be better to explore another financing option like a credit card.
Aliyyah Camp is a writer and personal finance blogger who helps readers compare personal, student, car and business loans. Aliyyah earned a BA in communication from the University of Pennsylvania and is based in New York, where she enjoys movies and running outdoors.
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