What is a Short-Term Loan?

Short-term loans often are personal loans that can allow you to borrow a small sum of money. Then, you pay back the borrowed amount, and any interest, over time. Short-term loans may feature smaller borrowed amounts, from a few hundred to a few thousand dollars, that you pay back over a shorter time period than on a long-term loan. Short-term loans also may be unsecured, meaning you do not have to offer collateral. Qualifying for a short-term loan is usually dependent upon your credit history and your credit score at the time.

When to Consider a Short-Term Loan

How might a short-term loan be helpful? Unexpected or new expenses could lead you to consider borrowing options. Medical expenses or the birth of a child, a major car or home repair, a wedding or funeral, or emergencies could necessitate a short-term loan to help you cover extra costs while also making ends meet.

Types of Short-Term Loans

There are several types of short-term loans to consider depending on your income, budget, credit, and other qualifications.

Lines of Credit

If you aren’t sure how much money you need to borrow, a line of credit may be an option for you. With a line of credit, you can have access to funds as needed within a predetermined credit limit. This can be especially helpful if you aren’t sure how much an emergency expense will cost up front. You typically have the option to pay back the amount borrowed in a lump sum or in payments over time.

Payday Loans

Payday loans are short-term loans that allow you to access cash quickly and sometimes require full repayment with interest at your next payday. Payday loans can be a risky choice because the interest rates are usually much higher than other types of credit. According to the Consumer Federation of America, payday loans typically have a 400% APR or more^ΩΩ. It can be a major risk to your pocketbook and possibly your credit score if you take out a payday loan and run into trouble paying it back on time. Consider this option with caution.

Installment Loans

Installment loans are a type of short-term loan that typically let you borrow a small lump sum quickly. Unlike payday loans, installment loans often have predictable weekly and monthly payments with lower interest rates. This flexibility can be helpful, but it may end up causing problems if you can’t meet the repayment deadlines.

How to Get a Short-Term Loan

You can get short-term loans from banks, credit unions and other lenders. Depending on where you choose to get your short-term loan, different loan amounts, fees, payback periods, and interest rates may apply. Qualifying for a short-term loan also typically depends on the lender. Many lenders may require information about your credit history, credit score, or verifiable income to determine if you qualify.

If you're a Huntington customer, we may have the solution for you with Standby Cash^®.

Standby Cash is a line of credit that could be available to you right now. Log into your Huntington account online or in the mobile app to see if you qualify. You could access between $100 and $500 in just a few clicks. Just pay a 5% cash advance fee when you make a transfer. Pay it back over three months and there's no monthly interest charge when you set up automatic payments. Otherwise, a 1% monthly interest charge (12% APR) applies to the outstanding balances.^†

To qualify for Standby Cash, you need $1,000 or more in monthly deposits to a Huntington personal checking account for three consecutive months, and an average daily balance of $200 or more in your checking account. Other eligibility requirements apply, including your recent overdraft and/or return history^†. Qualifying for Standby Cash is based primarily on your checking and deposit history, rather than your credit score. Once you open Standby Cash, you can instantly transfer cash to your checking account. And you're eligible to make transfers as long as you continue to meet the requirements. The account and your activity are reported to credit reporting agencies, so your use could positively or negatively affect your credit score.

While Standby Cash is not overdraft protection, Huntington customers can leverage it to help clear up an overdraft. If you believe you are going to overdraw your account, you can use Standby Cash and make a transfer to prevent the overdraft from occurring. If you do not bring your account positive while 24-Hour Grace is in effect (before midnight central time the next business day), your Standby Cash line will be suspended from further use until your account is no longer negative^†. So, make sure to keep an eye on your finances and avoid overdraft and return transactions.

Advantages and Disadvantages of Short-Term Loans

Short-term loans are an opportunity to cover extra or unexpected costs without cutting into your budget. However, there can be drawbacks to taking out a short-term loan rather than raising funds in other ways.

When deciding to take out a loan, always consider your monthly income and budget. This can help you determine the amount you’ll need for your short-term loan and which type might be right for your circumstances. Also make sure you understand the terms of your repayment plan and that you will have the means to cover it.

Short-term loans may require a higher monthly payment than other lending options, which can put extra stress on your budget. Depending on the type of short-term loan you choose, you might also encounter fees that require payment upfront or high interest rates.

Features short-term loans can offer include quick access to borrowed cash, a typically faster application process, and a relatively easy qualification process.