What Is Good About A Short Term Loan?


If you require quick funds to settle emergencies quickly and repay your debt in a short period, short-term loans offer those advantages and more.

If you’re wondering what is a short term loan, they are loans that have a shorter repayment period compared to traditional loans, but a higher interest rate.

There are different types of short-term loans in Singapore available to you. Various parties such as money lenders also provide short-term loans to individuals.

In the article, we cover everything about short-term loans, and how you can get started with applying for one.

What Is A Short Term Loan?

Short-term loans are loans with a shorter period of repayment, usually within a year. That said, some lenders consider a repayment period of less than two years as short-term.

This type of loan usually has a higher interest rate, as they are required to be paid in a short time. They are also typically unsecured loans that do not require collateral.

They have a quicker approval time compared to traditional long-term loans and are expected to be paid back in monthly installments.

With short-term loans, you can get the funds you need fast to finance a personal situation, maybe to pay bills or finance a downpayment.

They are also ideal for entrepreneurs that need a cash in-flow in the short term.

Types Of Short-Term Loans

Loans for the short term come in many forms. They include:

  • Emergency cash loans
  • Payday loans
  • Bridging loans
  • Line of credit
  • Invoice financing

Emergency Cash Loans

Sometimes, emergencies may arise and you find yourself short on funds to tackle them. Emergency cash loans are a quick alternative to foot the bills for emergencies such as hospital bills or car repairs.

Licensed money lenders like BST Credit tend to have faster and more lenient processes for emergency loans compared to banks.

Payday Loans

Payday loans are also emergency loans. However, they require the entire loan amount plus interest rate to be paid out in one lump sum once the borrower receives his or her pay for the month.

Payday loans can help you meet unexpected financial situations, and don’t put you in debt for long, as you can pay off the debt quickly.

Regardless, the interest rate for payday loans is higher than usual, so you want to ensure you only borrow what can be paid back conveniently without putting yourself in a tight spot for the rest of the month.

Bridging Loans

Bridging loans can come in handy when you need to buy a new home but your old home isn’t sold off yet.

Typically, borrowers obtain bridging loans to finance the downpayment of their new home, while they await the sales proceeds from the old one.

Bridging loans tend to have a high interest rate and are required to be paid back in six months.

Line Of Credit

These are just like business credit cards, but with lower annual interest rates. If you’re a business owner facing a cashflow problem, this can help you fix the situation quickly.

For a line of credit, a credit limit is set, and the borrower can make withdrawals when needed. The debt is expected to be paid in monthly installments.

For instance, if you have a line of credit for $20,000, you can withdraw $10,000. You’ll be left with $10,000 and only need to pay interest on the withdrawn amount.

Invoice Financing

This is another type of short-term loan for business owners. Borrowers can use the invoice(s) of customers to obtain loans from loan providers.

The loan provider gives the borrower the funds and charges interest on the loan. When the invoice is paid, the interest rate is deducted, and the borrower is given the balance.

This type of loan can also be helpful for businesses with cashflow problems.

Pros And Cons Of Short-Term Loans

Short-term loans have amazing benefits which make them appealing, but they also have some drawbacks.

Pros Of Short-Term Loans

Less Strict Requirements

Because short-term loans are usually provided in small amounts and expected to be paid back quickly, they have less strict requirements. They may require less paperwork, and if you are borrowing from a money lender, it might not consider your credit score at all.

Faster Approval

Short-term loans have a faster approval rate than traditional loans. Some loans can even be approved by money lenders in 30 minutes to 24 hours.


Short-term loans are flexible, as they can be customised to suit the borrower. For instance, repayment options can be weekly, bi-weekly, or paid as a lump sum on payday.

Less Interest Paid

While short-term loans have higher interest than traditional loans, the amount of total interest you pay is lower compared to long-term loans. This is because the more you owe, the more you pay the loan provider.


Short-term loans are easy to access. Licensed money lenders, banks, and private loan providers can give out loans for the short term.

Cons Of Short-Term Loans

Higher Interest Rates

Short-term loans have a higher interest rate than long-term loans, as the loan is expected to be paid off in a short period.

Higher Chance Of Defaulting On Payments

There is a higher chance of a borrower skipping the monthly payment because of the low amount and short repayment period. However, this will only lead to more debt in terms of accumulated interest and late payment fees.

Easier To Form The Habit Of Borrowing

The ease to borrow, less stringent requirements, and short repayment period can be the perfect recipe to form the habit of borrowing, which will plunge you into more debt.

Opportunities For Loan Scams

The low amount can make it easier for scammers to offer loans at high interest rates, especially if you’re considering borrowing from a money lender.

Always check if a money lender is licensed by looking at the Ministry of Law’s list of licensed money lenders in Singapore.

Alternatives To Short-Term Loans

Before you take out a short-term loan, it’s wise to consider what other alternatives are available to you. Some of these could be:

Friends And Family

Your loved ones might be willing to lend you loans for a much lower interest rate, or no interest rate at all. However, it might be wise to put the terms of the loan in a formal agreement to prevent misunderstandings or unhappiness later on.

Sell Items For Cash

You may have some valuables lying around that you no longer need, but which still have good monetary value. Put them to good use.

Get A Payday Advance From Your Employer

Your employer might be willing to grant you a payday advance, and this might also come at no interest. This means more savings in terms of the interest you would have otherwise paid.

Where To Apply For Short-Term Loans

There are three categories of loan providers that can advance short-term loans. They include:

  1. Licensed money lenders
  2. Banks
  3. Private lenders

Licensed Money Lenders

You can obtain short-term loans from licensed money lenders in Singapore, depending on your annual income.

Annual Income Of BorrowerSingapore Citizen Or Permanent ResidentForeigner Residing In Singapore
Less than $10,000$3,000$500
At least $10,000 but less than $20,000$3,000$3,000
At least $20,000Up to 6x their monthly incomeUp to 6x their monthly income

The maximum interest rate a money lender can charge for the loan is 4%. They can also charge a maximum of 4% for late interest.

However, you might also incur other fees such as

  • Administrative fees capped at 10% of the loan amount
  • Late payment fees capped at $60 for each month of late repayment
  • Legal fees if the money lender has to use the action of the court to recover the loan

Only borrow from licensed money lenders who are on this list.


Banks are another good option for short-term loans. They usually offer lower interest rates compared to licensed money lenders for personal loans.

However, they have a slower approval process, and focus on your credit score before granting you a loan.

If you need to finance an emergency situation, and you have a low credit score, banks might not be the best option.

Private Lenders

These loan providers are prohibited from holding a moneylending license but can engage in the business of moneylending. However, they can only give loans to investors or corporations.

For individuals:

  • Your net personal asset must be at least $2 million, of which the value of your residence shall not be more than $1 million.
  • Income for the preceding 12 months should be at least $300,000

Corporations must have net assets valuable at $10 million and above. Keep in mind that private lenders might require some form of collateral before they advance the loan.

How To Apply

Applying for a short-term loan is easy. While the application process might vary among different providers, these are the steps:

  • Apply online, or in person at the approved place of business of the loan provider.
  • Complete the application form.
  • Undergo an interview or physical verification.
  • Sign the loan agreement.
  • Wait for your loan to be approved.

How Long Does Approval Take?

How long approval takes depends on the loan provider in question and the amount of money you’re borrowing.

Banks, for instance, have longer approval times, which can range from one to seven days for application processing.

Money lenders, on the other hand, can quickly approve loans when you meet the criteria. Approval times can range from 30 minutes to 24 hours.

A Short Term Loan May Be Just What You Need

Don’t let that financial situation keep you up at night.

BST Credit, an established licensed money lender in Singapore, offers short-term loans quickly and at some of the best rates in Singapore.

Speak to one of our loan experts today at +65 6299 1782 or apply for a short-term loan online.

Ready to try BST Credit?

Apply Now