A short-term loan is any loan that is repaid in a short amount of time. This term is generally used to describe small personal loans for borrowers with low credit scores. Common short-term loans can be an installment loan but are typically payday loans, title loans, pawnshop loans, and more.
Short-term loans may come in many different shapes and sizes, but the thing that unites them all is that the borrower doesn’t have very much time to repay the loan. This can make them tough to repay depending on how much the interest and additional fees are. A short-term loan with a high APR may be very difficult to repay on time.
Short-term loans are also usually small-dollar loans. This means that many short-term options don’t offer borrowers very much money. But ultimately, this will depend on the specific loan, lender, and your financial situation.
Here’s a list of the most common types of short-term loans for borrowers with bad credit:
Payday Loans – A payday loan is a short-term, small-dollar, unsecured loan. Unsecured simply means that you don’t need collateral to get one. They usually have to be repaid within two weeks or by the borrower’s next payday, hence the name. They do carry high interest rates and they can be difficult to repay for some borrowers.
Car Title Loans – This is a secured loan, meaning the borrower will need to have collateral. The collateral would be the title to your vehicle. This means that if you can’t repay the loan the lender can take your vehicle away and sell it to recover their money. They typically only last 15 to 30 days but it will depend on the specific lender.
Pawnshop Loans – These are secured loans as well, which means you’ll need collateral. The collateral in this case can be any valuable item that the lender/shop will accept. This may be jewelry, electronics, or other valuable items. The specific repayment period will depend on the lender but it likely won’t be very long.
No matter which one you’re considering, the most important thing is to make sure you’re able to repay the loan before signing for it.