Personal Finance

What Can You Use A Short Term Personal Loan For?

November 2, 2022

Loans come in handy when you’re in dire need of cash. You could be needing funds for a car, property, or even for your education.

Although there are different types of loans, your needs should determine the one you apply for.

If you’re looking to apply for a loan in Singapore, you may want to consider a short term personal loan.

In this article, you’ll find out what a short term personal loan is and what it can be used for.

What Is A Short-Term Loan?

As its name suggests, short-term loans are loans with short tenures. They are usually repaid within a year.

People normally apply for these types of loans to cover unexpected expenses or urgent needs.

Short-term loans usually range between $100 and $35,000. The good thing about this type of loan is that you get to pay it back quickly. This means you won’t be in debt for long and don’t have to keep servicing a loan for the next few years.

Also, most people who take short-term loans do so knowing they’ll have the means to pay when the loan is due.

Although this may not always be the case, with the right repayment plan, short-term loans are the perfect quick fix when you need money urgently.

What Can It Be Used For?

Short-term personal loans are mainly used for emergencies. Many people use it to cover their regular expenses until their next paycheck comes in. Some of these expenses include:

  • Rent
  • Travel expenses
  • Food and groceries
  • Utility bills
  • Personal upkeep
  • Home/vehicle repairs
  • Medical expenses

Interest Rates Of Personal Loans

The interest rate of a personal loan varies. The factors that affect the interest rates of personal loans include:

Financial Institution

The interest rate of a personal loan will vary depending on the financial institution you’re dealing with.

Money lenders charge a monthly interest rate of 4% on personal loans. Some banks may charge lower than this, but you also have to deal with their long-drawn-out approval processes.

Effective Interest Rate (EIR)

In simple terms, the EIR is the total interest you have to pay on your personal loan. It includes processing fees and factors in your repayment schedule.

The EIR is a much better reflection of your interest rate.

Processing Fee

The processing fee is a hidden cost that’s worth noting. It’s deducted from the principal amount, hence it is included in the official interest rate.

For example, if you took a $10,000 loan with a 1% processing fee, you’ll receive $9,900 with $100 deducted as the processing fee. As mentioned earlier, this fee is included in the EIR.

Other factors that affect your personal loan interest rate are your income, credit score, the loan term and loan amount.

Pros And Cons

The following are the benefits and disadvantages of taking a short-term loan.


  • Lower interest amount: Since the loan tenure is usually a year, you won’t be in debt for long. This reduces the amount of interest you pay in the long term.
  • Quick application process: Many short-term loan lenders can process your loan application within a few hours and give you the money promptly. There’s little paperwork. You can simply apply online. For a licensed money lender, you must visit its office for identity verification and to collect the money.
  • Quick money for emergencies: There’s nothing like getting a quick cash injection when you need one.  Since many short-term loan lenders offer a quick application process, you can easily get quick cash for emergencies.
  • Lenient credit checks: Normally, licensed money lenders will take your credit score and credit history into consideration when you apply for a loan. But their processes are less stringent than that of banks. Hence, money lenders can overlook a credit score that’s not so good and focus more on your annual income.
  • Flexibility: Unlike other kinds of loans, short-term loans offer flexibility. You will have far more freedom to choose the loan amount, interest rate and repayment structure. For starters, many licensed money lenders allow you to choose whether you want weekly, bi-weekly, monthly, or payday repayments. This gives you more control over your repayment schedules.


  • High interest rate: Short-term loans might be useful and easy to get, but the interest rate is pretty high. This is due to their short loan tenure. Unlike long-term loans where you get to pay monthly interest for a longer period, you only have a few months to pay interest on a short-term loan. This explains the unusually high interest rate.
  • Frequent repayment increases the probability of defaulting: Some borrowers have to make weekly repayments on their short-term loans. This frequent repayment structure may increase their chances of defaulting on a loan if their finances aren’t well managed. They may be forced to apply for more loans to repay what they already owe. This could lead them into an undesirable debt trap.
  • Higher penalties for defaulting: Just like how the interest rates are higher, the penalties for defaulting on a short-term loan are just as high. This is why some borrowers are forced to borrow again to pay off their short-term loans.

How To Choose The Right Repayment Plan

If you’re applying for a short-term loan, the payment plan you choose is crucial. It could make or break your ability to pay back the loan without defaulting.

Hence, if you’re not guaranteed a consistent flow of cash, it may be wise to stay away from weekly repayment plans.

Although monthly repayments mean you have to pay interest for a longer period, it’s much better than committing to a payment plan you can’t keep up with.

But if you’re guaranteed a steady flow of cash over the next few months, you may even opt for a bi-weekly payment plan.

This allows you to pay back your debt quickly and reduces the total amount of interest you’ll need to pay.

How Long Should The Loan Tenure Be?

Loan tenures can differ depending on your situation. If you’re able to repay your loan quickly, you should choose the shortest loan tenure.

But if you’re not certain you can pay back your short-term loan quickly, then it’s imperative to choose a monthly repayment plan.

That said, it’s best to avoid a long-drawn-out repayment plan as it puts you in debt for much longer and increases the total amount of interest you’ll have to pay.

Where To Get A Short-Term Loan

There are three places to get short-term loans in Singapore. They are:


Banks offer short-term personal loans to borrowers who have decent credit scores. As you would expect, it may be quite difficult to get a short-term bank loan if your credit score is bad.

Banks usually offer lower interest rates than some other financial institutions. However, their application processing may take a while.

Hence, if you need money urgently, a bank may not be the best place to apply for a short-term personal loan.

Private Funders

Private funders aren’t regarded as money lenders nor are they required to operate with a license.

But they are allowed to offer short-term financing to corporations and accredited investors. However, this selected group of people will need to meet at least one of the following conditions:

  1. Income earned in the last 12 months should be at least $300,000
  2. Net financial assets should exceed $1 million in value
  3. Net personal assets of $2 million with the value of the primary residence not exceeding $1 million

If you’re in any of the groups mentioned above and meet at least one of the conditions stated, you’re qualified to apply for a short-term loan from a private funder.

It is also worth noting that private funders may ask you to back your loan with collateral.

Licensed Money Lenders

You can also apply for a short-term loan in Singapore from licensed money lenders. Since they are regulated by Singapore’s Ministry of Law, the number of unsecured loans they give out depends on the borrower’s annual income.

For example, if you’re a Singaporean or a permanent resident who earns less than $10,000 a year, you can only borrow $3,000. However, it’s faster to get short-term loans from licensed money lenders as compared to banks.

More importantly, having a bad credit score isn’t a barrier.

There are more than 100 licensed money lenders in Singapore and GS Credit is one of the names you can trust when you need loans with low-interest rates.

We also have professional loan officers with in-depth knowledge to provide the best financial assistance in Singapore.

Contact us now or apply for a loan with us today.

Related Articles

Singapore Term Loan: Customisable Loan Tenures To Help With Comfortable Repayment Planning For A Funeral Service In Singapore: What Are the Immediate Steps to Take Once A Loved One Passes On?

GS Credit is made for you

Customized loans add flexibility and affordability to your life.

Get the funds you need in just 24 hours.

Ready to get your cash?

© 2024 GS Credit Pte. Ltd. All Rights Reserved.
License No. 74/2024