Best Short-Term Loans: Compare Rates, Lenders, and Terms

Your car needs a new alternator, or a medical bill landed before your next paycheck. You need money this week, not next month, and every ad you scroll past promises fast cash with no real explanation of the cost.

Search “short-term loan” and the definition shifts depending on where you look: a two-year installment loan on one site, a two-week payday loan on another. Which type you pick changes your total cost by a lot. 

Take a look at the different types of short-term loans, how to choose the right one for your situation, and some lenders that could give you a good place to start.

What is a short-term loan?

Personal loan terms typically run two to seven years, though some lenders offer shorter loans of a year or less. Also called signature loans, most personal loans don't require collateral (something of value to back up the loan), so the lender takes your signature as your promise to repay.

Short-term generally means the low end of the term length range: roughly one to three years, depending on the lender. There's no single industry standard for where short-term ends and long-term begins. Look at a few competing sites and you'll find different cutoffs.

That's a different question from whether a “short-term loan” only means a personal loan. Online, the phrase also covers payday loans, advance apps, title loans, and buy now, pay later (BNPL) plans, each with different costs and risks.

Short-term loans vs. payday loans, PALs, title loans and BNPL

A lot of products are advertised under the guise of a short-term loan. Here's a brief look at the most common types:

• Personal installment loan. You get a lump sum upfront and repay it on a fixed schedule at a set interest rate. Most personal loans are unsecured, but secured options exist.
• Payday alternative loan (PAL). A small-dollar loan only federal credit unions can offer, with rates and fees capped by the National Credit Union Administration. PAL I loans run $200 to $1,000 over one to six months; PAL II loans run up to $2,000 over one to 12 months. Both cap the APR at 28% and the application fee at $20. You typically need to belong to a credit union, and not every credit union offers them.
• Cash advance apps. A few online banks and financial apps allow you to get an advance on your paycheck with low or no fees. These typically require advanced setup and linking your bank account, but no credit check.
• Credit card cash advance. Your credit card may allow you to withdraw cash from an ATM, up to a portion of your credit limit. A cash advance will start accruing interest immediately, often at a higher rate than regular purchases, though it could still be more affordable than other options.
• Payday loan. Usually $500 or less, with no credit check, due in full on your next payday, typically two to four weeks out. A typical two-week payday loan with a $15-per-$100 fee works out to almost 400% APR, according to the CFPB.
• Title loan. Secured against your vehicle's title. If you fall behind, the lender can repossess your car. Title loans can have fees that translate to very high interest rates—over 300%, in fact.
• Buy now, pay later (BNPL). A form of installment credit, usually split into a small number of payments with little or no money down.

One number applies across all of them. The Military Lending Act caps the Military Annual Percentage Rate at 36% for active-duty servicemembers. That cap applies to payday loans and most other consumer credit. This is often cited as the affordability benchmark for everyone else, too. Loans above 36% APR are widely considered predatory by consumer-protection groups. 

A personal loan usually costs less than a payday loan, a title loan, or BNPL. The PAL loan is the exception: It has a capped rate that can beat many personal loan offers, especially for fair or poor credit. You just need to be a member of a credit union that offers one.

Top short-term loan lenders to compare

Many popular lenders offer smaller personal loans with shorter terms that may suit your situation. Here's how they stack up:

Good to excellent credit:

• SoFi: No origination fee on SoFi Bank loans, terms of two to seven years, loans from $5,000 to $100,000.
• LightStream: No origination, late or prepayment fees of any kind. Only accepts borrowers with good to excellent credit.

Fair or limited credit history:

• Avant: No minimum credit score published; built for borrowers other lenders have turned down. Loans from $2,000 to $35,000.
• Upstart: Factors in your education and employment alongside your credit score, which can help if you have a thin credit file. Loans from $1,000 to $75,000.

Fastest funding:

• Discover: Funding times vary by lender, but often land within a week of approval. Discover skips the origination fee, with loans from $2,500 to $40,000, and it's active despite its 2025 acquisition by Capital One.

Smallest loan amounts:

• Best Egg: Loans starting at $2,000, with terms of 36 to 60 months.
• Prosper: Loans from $2,000 to $50,000, and the only lender in this group that allows a joint application. Discover, Upstart and Avant don't.

If you have fair or limited credit, the best personal loans for bad credit may provide more options from lenders that cater to your credit score range.

How much do short-term loans cost?

Two numbers drive your total cost: the interest rate and origination charges.

Rates vary widely based on your credit, income, lender, and current market conditions. You can get an idea of your general rate range by getting prequalified from three to five lenders. Use lenders that offer prequalification with a soft credit inquiry that doesn't impact your credit score. 

Prequalification can also give you an idea of what other loan fees you might pay. Personal loan origination fees range from 0% to 12% of the loan amount, meaning some lenders charge none while others go up to 12%. 

When charged, the origination or admin fee is typically deducted from your loan before it hits your account. On a $10,000 loan with a 5% fee, that means $9,500 lands in your account, even though you owe the full $10,000.

Shopping for a short-term loan

The low advertised rates you see on most lenders' websites will be the best-case-scenario rate that only a few borrowers will actually receive. The best way to get a personalized estimate of the rates you could receive is through prequalification. 

This involves answering a few questions about your income and authorizing a soft credit check that won’t harm your score. While prequalification isn’t a commitment to lend, it should tell you what sort of loan terms and interest rates you could expect from that lender if you move forward. 

You’ll want to look at the loans’ annual percentage rate, or APR, not just the regular interest rate. APR includes common loan fees, like origination fees, so it makes it easier to compare loan offers with the same term length but different costs. 

A lower interest rate but higher origination fee could be more expensive than the opposite—or vice versa. The APR gives you the full picture. For instance, consider two five-year loans where one has no fees and a 10% interest rate, while the other has a 3% fee and an 8% interest rate. The APR for Loan 1 would be 10%, while the second loan has an APR of 9.3%. In this case, Loan 2 would be cheaper overall.

How to qualify for a short-term loan

Lenders evaluate your ability to repay using your credit score, credit history, employment status and debt-to-income (DTI) ratio. Some fintech lenders also use education and employment data alongside your credit.

Your credit score sorts you into a tier. FICO's tiers are: 

• Poor (below 580)
• Fair (580 to 669)
• Good (670 to 739)
• Very Good (740 to 799)
• Exceptional (800 and up)

You may also see the term subprime used for scores below 620. Lenders generally treat sub-620 as higher risk.

The easiest way to know if you’re eligible with a lender is to prequalify. If you’re worried about being approved, prequalify only with lenders that use a soft credit pull.

Pros and cons of short-term loans

Compared to a loan with a longer term, a short-term loan generally trades a lower total cost for a bigger bite out of your budget each month. Here's a quick look at the pros and cons:

If you're worried about the higher monthly payment on a shorter-term loan, consider getting a slightly longer term. As long as your budget works out, you could make extra payments to keep the overall cost down, while having a bit more flexibility if your budget changes.

Watch out for prepayment penalties, however. Some lenders may charge you a fee if you pay off your loan too early. Ask your lender about prepayment penalties if you're interested in this option.

Bills Action Plan

1. Figure out the exact amount you need and how fast you need it. Most short-term personal loans work best for expenses you can repay within one to three years.

2. Get prequalified with at least three lenders that use a soft credit inquiry so it doesn't impact your score.

3. Compare the interest rate, loan fees, and total repayment amount side-by-side before you sign, and skip anything above 36% APR.

Key Terms

APR (Annual Percentage Rate): The total yearly cost of borrowing, including your interest rate plus most lender fees. It's the number to use when you're comparing loans with the same term length.

Origination fee: A fee some lenders charge to process your loan, taken out of the amount you actually receive. Sometimes called an admin fee. It typically ranges from 0% to 12% of the loan amount, and some lenders charge none at all.

Installment loan: A loan you repay in equal monthly payments over a set period. Personal loans, auto loans, and BNPL purchases are all installment loans.

Signature loan: Another name for an unsecured personal loan. The lender takes your signature as your promise to repay instead of collateral (something of value that backs up the loan).

PAL (Payday Alternative Loan): A small loan some federal credit unions offer as a lower-cost alternative to a payday loan. Rates and fees are capped by federal rule, and you usually need to be a credit union member to get one.

Soft credit inquiry: A credit check that doesn't affect your credit score. Lenders often use one to let you prequalify. It's different from a hard inquiry, which can lower your score slightly and happens when you formally apply.