What Can You Use A Short Term Personal Loan For?

Dexter Lee January 10, 2023

What Can You Use A Short Term Personal Loan For?

When you’re in an unexpected cash crunch, a short term personal loan can be useful in getting you out of a bind.

Short-term personal loans are popular as they offer a fast way to address personal and household needs.

If you are facing a rough time in budgeting or unprecedented expenses, consider applying for a short term personal loan to bridge the gap.

Are you an entrepreneur who wants quick cash to cover several expenses? You can also take such a loan.

In this article, you’ll learn how to use a short term personal loan in Singapore.

What Is A Short Term Personal Loan?

A short term personal loan works like medium- and long-term loans, but the difference is that a short-term loan is meant to be repaid within a short time of less than a year. Loan amounts range between $100 to $35,000.

However, some lenders regard less than two years as a short term. Short-term personal loans are often borrowed to cater to personal needs or a new business venture.

They are usually unsecured, and do not require collateral. A licensed money lender can usually approve a short-term loan within a day, but only after it has checked that your annual income meets the criteria.

Not all money lenders or financial institutions use the same term for a short term personal loan.

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    Other terms that can be used to refer to a short term personal loan include a payday loan, payday advance, cash advance, fast cash loan, and payroll loan.

    What A Short Term Personal Loan Can Be Used For

    Short-term loans are useful for upfront costs that require urgent payment. For instance, start-up businesses may use such a loan for their payroll, inventory, and rent.

    If you’re a business owner, you can opt for a short-term loan to cater to your financial needs without affecting your operational capital.

    Hospitality businesses could also use this type of loan to invest in certain business inventories before the tourist season to take advantage of discounts.

    On a personal note, you can use a short-term loan for:

    • Rent
    • Travel expenses
    • Food and groceries
    • Utility bills
    • Personal needs
    • Home or vehicle repairs
    • Medical expenses

    Interest Rates Of Personal Loans

    The cost of a personal loan depends on various factors, such as loan duration, loan amount, and annual income.

    The shorter the loan tenure, the more you save on interest. However, you’ll have to pay more every month owing to the short tenure.

    Interest rates for short-term personal loans vary among different money lenders in Singapore.

    In Singapore, most lenders charge about 5.6% per year on the principal amount. remember to look at the effective interest rate to see the actual loan cost.  The EIR is the total interest you pay on your personal loan. It includes processing fees and factors in your repayment schedule.

    When it comes to licensed money lenders, the Ministry of Law regulates the interest rates and other fees that they can charge.

    A licensed money lender can only charge a maximum interest rate of 4% per month, regardless of your annual income, and whether the loan is secured or unsecured. The same interest rate is charged if you are late with your payment.

    Pros And Cons Of Short-Term Personal Loans


    • The loan is processed quickly and often requires less paperwork. Most lenders offer a shorter turnaround time for such loans. This is one of the reasons why these types of loans are popular as they have limited requirements.
    • There’s a high chance of having your loan approved even with poor credit. Most lenders will check your credit history before approving the loan and may disqualify those with a low rating. But for short-term loans, licensed money lenders check your annual income and cashflow and not your credit history. Your application may get approved when you prove that you can repay the loan.
    • You pay less interest overall because of the short tenure.
    • Short-term loans in Singapore do not need collateral.
    • You can choose between weekly, bi-weekly, monthly, or payday repayments.


    • Because short-term personal loans have a short maturity term, they have high interest rates. As you only have a few months to pay interest on a short-term loan, the interest rate will be higher. They are also considered high-risk loans since they are not secured by collateral.
    • As the loan tenure is short, your monthly repayment cost will be higher as you have less time to repay your loan.
    • If you aren’t rigorous about making your repayments on time, you may be forced to take on more loans to repay your debt. Eventually, you could be stuck in an endless debt cycle of piling debt and multiple loans.

    How To Choose The Right Repayment Plan

    Ensure you choose a loan amount you can repay easily every month. You may face severe penalties if you don’t honour the month’s repayments.

    That said, don’t choose a loan tenure that is too long because you will pay more interest in the long run.

    Remember to read your money lender’s terms and regulations and ensure you understand the contract so you won’t get surprised with additional fees and other charges you may incur. This will enable you to pay your loan every month without struggling.

    Remember to always plan on how you are going to pay for any loan as without a solid plan, your monthly payments can easily go awry.

    How Long Should The Loan Tenure Be?

    Applying for a short term personal loan is not as easy as it sounds. The loan tenure may be short, but it is still a big decision that involves choosing the appropriate loan tenure for your finances.

    In Singapore, loan tenures vary from one financial institution or licensed money lender to another. As mentioned, you can choose weekly, bi-weekly, monthly, or payday repayments.

    Lenders determine the loan tenure after considering various factors such as your age, income, expenditure, loan amount, and loan purpose.

    To choose the most suitable short-term tenure for yourself, ensure you review your financial situation, make a budget, and know the exact cost of the loan.

    Bear in mind that the loan duration should be as short as you can make it.

    With a shorter loan period, you won’t stay in debt for longer than you need to and can pay less interest overall. That said, ensure you can repay the amount easily.

    Where To Get A Short-Term Loan

    Licensed Money Lenders

    Licensed money lenders in Singapore offer secured and unsecured loans. It’s safe to borrow from such lenders as the Ministry of Law regulates the moneylending industry in Singapore.

    The Ministry stipulates laws and regulations about how much legal money lenders can charge borrowers regarding interest rates and other fees. Check the list of licensed money lenders in Singapore from the Ministry of Law’s website to avoid falling to loan sharks.


    Many banks in Singapore offer short-term personal loans for personal and business uses.

    Although they offer short-term financing at low interest rates, they generally have a longer approval process than licensed money lenders.

    Apart from this, they will also examine your credit score closely, which may lower your chances of approval if you have a poor rating. Therefore, if you need cash urgently, a bank may not be the best option.

    Private Lenders

    This is another option to get a short term personal loan in Singapore. Such lenders are excluded under the Moneylenders Act and exempted from holding a license.

    As such, private lenders in Singapore can only offer financial services to recognised investors or corporations that have to meet at least one of the following conditions:

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

    Note that private lenders or funders may ask you to back your loan with collateral.

    A Short Term Personal Loan Has Many Uses

    Short-term personal loans are useful for emergencies.

    Generally, comparing rates from different lenders is a smart move before you choose the best short term personal loan. This will help you find the best rates that suit your needs.

    If you need a short term personal loan, consult CreditMaster. As a trusted licensed money lender in Singapore, we will ensure you get a loan you can comfortably repay without financial stress.

    We have years of experience in helping our clients so you can be sure we will offer sound advice.

    Get help from our friendly loan officers or get started by applying for a loan now.

    Dexter Lee

    Born with a pen in one hand and a keyboard in the other, Dexter's been crafting words into beautiful prose since he was old enough to scribble on his walls (much to his mother's chagrin). He's a self-proclaimed pun master, often leaving his coworkers in stitches with his clever wordplay. He's been known to strike up conversations with strangers and turn their stories into captivating content that keeps readers coming back for more. Despite his unconventional approach to life and work, Dexter takes his job as a content manager very seriously. He knows that every piece of content he produces has the power to make a difference in someone's life, and he's committed to using his words for good.

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