What Can You Use A Short Term Personal Loan For?


Do you need some quick cash for an emergency? Would you consider taking a quick loan to help the situation?

For instance, you may require cash urgently to deal with a medical situation or a loved one in need. Under such circumstances, you can consider taking out a short term personal loan to help you out. 

Let’s find out how a short term personal loan works, as well as its pros and cons. 

What Is A Short Term Personal Loan?

A short-term personal loan ranges from $500 to $35,000. Such loans are mostly unsecured, so you don’t have to worry about providing collateral.

Lenders approve your personal loan after reviewing your financial history and other factors, such as your annual income.

In most cases, short-term personal loans have a 12-month repayment term. You won’t have to wait long to get the money you need due to the simple approval process.

Banks and licensed money lenders may call short-term loans by other names, including payday loans, cash advances, payday advances, rapid loans, payroll advances, and payroll loans.

These loans provide temporary financial relief to help you out in an emergency or crisis. There are pros and cons to getting a short-term loan in Singapore, and you should weigh them carefully.

What Can Short-Term Personal Loans Be Used For?

Short-term personal loans can be immensely helpful when you need money urgently. It’s possible to acquire the cash you need in a matter of days, especially from licensed money lenders.

A short-term personal loan may be an option if you are facing a cash crunch and can’t wait until your next payday to get money. 

You can use it to pay for rent, groceries, utility bills, vehicle repairs, medical expenses, home improvements, and other unforeseen expenses.

Interest Rates Of Personal Loans

A personal loan with a short repayment term of a year may seem like a lifesaver at the time, but it often becomes a costly method to borrow money. 

This is because short-term personal loans typically have higher interest rates than long-term loans.

The interest rate for a short-term loan is determined by several factors, including the type of loan and the lender. Hidden expenses can push the annual percentage rate on a payday loan way over what you would normally accept.

Don’t just accept the first loan offer you receive. Compare your options to obtain the best interest rate for which you qualify.

Pros And Cons Of Short-Term Loans


1. Ease Of Access

Credit check requirements and other terms are typically more relaxed for short-term personal loans in Singapore. This makes them a more practical and simple option when you need cash quickly.

The application process for a short-term personal loan is typically quick and straightforward. The loan approval process is swift so that you may get your money in as little as a day.

Most payday and other short-term loans don’t even need collateral. That means you can apply for one without worrying about losing your assets if you fail to repay your loan.

2. Less Stringent Requirements

Short-term loans typically have low credit requirements. Most licensed money lenders will be more interested in your annual income rather than your credit score.

This means a short-term loan may be an option even if you have a less-than-perfect credit score.

3. Repayment Flexibility 

You can tailor the loan amount, repayment period, and interest rate of a short-term loan to suit your situation and finances.

For example, when applying for a payday loan, you can choose several repayment options. 

You may opt for weekly, biweekly, monthly payments, or on your next payday. You may find it easier to manage your monthly expenses with this method.

4. Availability And Convenience

You can secure a short-term loan in Singapore from banks and licensed money lenders. Most financial institutions and authorised money lenders offer online loan application processes. 

That makes it more convenient than ever to apply for a short term personal loan anytime.

However, if you approach a licensed money lender for the loan, you’ll need to visit its physical office location. The laws in Singapore require a licensed money lender to perform a face-to-face identity verification before it gives you the money. 

This in-person verification method reduces the risk of identity theft. It also allows the licensed money lender to have in-depth conversations with borrowers concerning the loan.


1. High Interest Rates

The interest rate on short-term personal loans in Singapore is typically higher than on loans with longer repayment terms. That makes them expensive loan options. 

Since the principal debt is being repaid over a shorter time, your monthly payments may be significantly higher than with a long-term loan.

2. Penalties For Non-Payment

It’s not uncommon to have late fees attached to overdue payments. So the fines for overdue payments on short-term loans may be overwhelming. 

So it’s crucial to borrow only what you can repay. Make sure you repay a short-term loan on time, so it does not worsen your financial situation.

3. Debt Can Be Addictive

If you don’t have enough funds, repaying the loan may be a challenge. As a result, you may need to take out a new loan to repay the original debt. 

Over time, you may find yourself falling into deeper debt. 

Due to their convenient nature, flexibility, and availability, short-term personal loans can quickly produce a never-ending debt spiral. 

So again, never risk borrowing more than you can afford. 

How To Choose The Right Repayment Plan

Consider carefully before taking on a short-term personal loan. Picking the correct type of short-term financing is vital if you want your monthly payments to be manageable. 

You may have to pay penalties if your monthly repayment isn’t paid on time. You should, however, exercise caution when deciding on a loan tenure. 

It should not be too short, but neither should it be too long. The latter may cost you a lot more interest over time. 

You may be subject to an early settlement cost if you need to pay off the personal loan early.


How Long Should The Loan Tenure Be?

Personal loans with a short term are reasonably named because of the urgency of repayment.

The typical repayment period is between six to 12 months, with the maximum allowed period being 18 months. 

A loan with a more extended maturity date is said to have a medium or long term. The typical length of a long-term loan is between one to 25 years. 

When it comes to repayment, some short-term loans don’t specify a schedule or a due date. So you can settle the debt at their own pace. Whatever you choose, ensure you make payment on time. 

Where To Get A Short-Term Loan 

If you’re wondering where you’d get a short term personal loan, here are some options.

Licensed Money Lenders

There are restrictions on the amount licensed money lenders can give, and the fees and rate of interest they can charge. You can find a comprehensive and updated list of licensed money lenders in Singapore on the Ministry of Law’s website.

A money lender may assess a late payment fee of up to 4% per month for every month that a loan is overdue. A late fee of up to $60 will also apply. 

The money lender will use the remaining principal to calculate the interest due after the repayment period is over. 


Banks in Singapore are plentiful, and many provide borrowers with access to loans for a short term. They have competitive interest rates (between 3-6% annually) and a wide variety of loans.

However, their approval process is often time-consuming. Banks also require you to have an excellent credit rating to get a loan.

Private Funders Or Lenders 

Money from private lenders is only available to accredited investors and corporations. To qualify as an accredited investor in Singapore, an individual must not earn more than $300,000 in the last 12 months.

They should also have a net personal asset total of at least $2 million. Their net financial assets should account for more than $1 million.

Such lenders can provide loans between $7,000 and $17,000 at interest rates between 10-17% per year. 

However, borrowers should be aware that private funders and lenders need collateral. They risk losing their assets in the event of loan default.

Is A Short Term Personal Loan A Good Choice?

If you need money urgently, a short term personal loan may be your best alternative as it is quick to get and has many uses. 

To get started, visit Katong Credit. We are a licensed money lender that offers low interest rates and top-notch service. Get help from our friendly loan officers or apply for a loan now.

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