Short term loans are essentially personal loans that offer you smaller sums of cash with shorter loan terms than those offered by personal loans.

A short term loan can be considered as a loan that can be repaid in full in under 12 months. Although instant and payday cash loans may fall into this category we will consider a short term loan to be any loan that offer terms that range from 3 to 12 months. Short term loans can be both secured and unsecured with unsecured being more commonplace since loan amounts are smaller and generally do not require security.

Why get a Short-term Loan?

Short term loans strike the ideal balance between the more competitive interest rates offered on personal loans but, with the convenience of being able to repay them within a short space of time and not having to commit oneself to long term debt - just like a quick cash loan.

In addition, short term loans can usually be obtained very quickly, online and without security. These loans are ideal for taking a holiday, covering travel expenses, purchasing electronics or furniture, paying doctors and vet bills and even, in certain cases, consolidating debt.

Where can I get a Short Term Loan?

Unlike with personal loans - short term loans are not offered by all lenders. There are certain banks and credit unions who offer personal loans that can be repaid in 6 to 12 months but many explicitly specify that they do not offer short term loan or have minimum loan amounts which make it hard for anyone to borrow a small amount of money from them.

One of the best and most popular places to get a short-term loan is online - through various alternative lenders and peer-to-peer platforms. Another option is to obtain a secured loan from a pawn broker who generally offer short-term loans more readily.

Why Short-term Loans are Different to Payday Loans

When considering your short term borrowing options it is important to make a clear distinction between a short-term loan and a payday loan because it will significantly impact your pocket.

Payday loans are those which offer smaller amounts of cash and must be repaid within up to 40 days while a short term loan offer a medium sized loan amount but with terms that stretch from 3 to 12 months.

Although both types of loans will cost more than a personal loan - the payday option is the most expensive and is far less flexible in term of amount and repayment frequency.

Top Features of a Short Term Loan:

  • You can obtain anything from $200 to $20,000
  • Ideal for smaller expenses and purchases
  • Those with good credit can secure competitive interest rates
  • Short term loans are available to people with poor credit
  • You can complete an online loan application
  • No need to offer collateral
  • Repay the loan in anything from 3 to 12 months
  • No need to commit to long-term debt
  • You can get your loan on the same day

Points to Note:

  • Short term loans usually carry a higher interest than long term loans
  • You are generally limited to smaller amounts of money
  • People with bad credit may have to pay higher rates
  • You can incur hefty non-payment and late-payment fees

Do I Qualify for a Short-term Loan?

Qualifying for a short term loan is generally much easier than for most forms of credit and there are lenders who work specifically with people who have bad credit. These are some of the basic lending requirements:

  • That you be aged 18 or over
  • That you are a NZ resident
  • That you be employed in a full time position or self-employed
  • That you can provide a photo ID
  • That you can provide 2 recent payslips and/or your bank statements
  • That you have an active bank account and email

Understanding Short Term Lenders

Short term lenders typically operate online and offer 100% online loan applications. Unlike with lenders that offer personal loans they cannot rely on the duration of the loan to generate a profit from their services and it is therefore necessary for them to charge more interest and in certain cases more fees.

Most short term lenders are quite flexible when it comes to their application requirements and are usually willing to overlook a bad credit history if the borrower is employed and earns a good monthly or weekly income. Since short-term lenders generally do not require a borrower to provide collateral they can process loan application much faster than mainstream lenders and generally offer a much more personalized service than the large corporate.

Finding an Affordable Short Term Loan

It is important to also consider the purpose of the loan since borrowing to purchase an urgent airline ticket is very different to borrowing to consolidate debt. When you consolidate debt it is very likely that a short term loan will carry a higher interest rate than your smaller debts taken into account individually and you may essentially end up paying more at the end of the day.

In order to secure an affordable short term loan you must take a number of lenders into consideration and carefully review their offerings. When it comes to loans that can be repaid in less than 12 months, the rates vary almost as much as the lenders themselves and, it is for this precise reason that using a loan comparison website is ideal.

How to Compare Short Term Loans

You must choose to either compare the interest based on daily interest, monthly interest or APR and then use this figure to compare lenders because while some lenders list their APR others choose to list their daily interest which always looks and sounds a lot better.

Another important factor is the lenders fees which may not always be clearly indicated on the lenders website. Some lenders will charge you, in addition to the interest, an application fee and/or a monthly loan management fee and while you may think you're getting a better deal by looking at the lenders interest rate you may end up paying just as much or even more for neglecting to add the lenders fees.