Couple researching short term loans online

Short term installment loans—often referred to as signature loans—can save you money on late fees from your bank and negative entries on your credit report. The key to using short term loans successfully may be in knowing when to get one and when to pay it off.

What are Short Term Loans?

A short term installment loan is an unsecured, personal loan usually made by a local loan store or an Internet lender. Be advised that short-term loans are different from payday loans. If you have a good relationship with your bank, you may be able to get one there. But keep in mind, whether it’s a bank or other lender, the interest rate on an unsecured, short-term loan is always higher than on a loan backed by property or assets.

When is the Right Time?

The main reason for using short term loans are for unexpected expenses such as car repairs, medical bills, a new computer, etc. These loans may also make sense when you’re facing late payment or bank overdraft fees. Taking out a short term loan to prevent bank fees may be worth it when you consider that the average overdraft fee these days is roughly $36 according to It’s important to note that some banks will close accounts that frequently bounce checks. If you think you might be late on your rent, you could be looking at a $50 to $100 fee from you landlord or rental agent. For those anticipating late payments to credit cards, expect about $30 in fees to be added to the minimum payment due. Many people decide to borrow a few hundred dollars rather than face the embarrassment and cost of late fees.

How and When to Repay Your Short Term Loan

As its name suggests, the repayment schedule for a payday loan is tied to your next pay date. If you choose a short term loan, many lenders will give you 6 to 12 months to repay it. The key to using most short term loan products may be to repay them in five payments or less. While this may be easier said than done, paying it off fast should be your goal with any loan. This route will save you a ton of money on interest. Remember, as long as you make the minimum payment on time, most lenders will let you make extra payments without any penalty. That’s something you can’t do with payday loans.

Read on to learn more about how to avoid falling into the pitfalls of the payday loan cycle.

Short term loans are a convenient, secure way to get funds when you’re faced with unexpected expenses. Unlike payday loans which are due in full plus interest on your next pay date, these loans offer 6 to 12 month repayment terms with no penalty for early repayment.

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