Most of us have been in a cash crunch at some point, when you find yourself in a mad scramble to get money quick – fast. Under such circumstances, one solution would be to get a short term personal loan.

If you are thinking of getting one soon, we’ll tell you what to look out when applying for a short term personal loan, how short-term loans work in Singapore, and what you can use a short term personal loan for.

We’ll also talk about the interest rates of short-term loans, their pros and cons, and where you can get such loans in Singapore.

What Is A Short Term Personal Loan And What Can It Be Used For?

A short term personal loan is an unsecured loan that involves a sum between a few hundred to less than $35,000.

Because of the urgency of such a loan, licensed money lenders in Singapore usually approve a short-term loan on the same day you apply for it.

Although it is approved relatively quickly, before a licensed money lender or bank gives you a short term personal loan, they consider a few things such as your annual income and your credit history.

Short-term loans are considered simple loan products that are usually paid in installments.

The usual repayment period for short-term personal loans is 12 months, but some lenders may give you up to two years to repay the loan.

Generally, you can use a short-term loan in Singapore as a quick financial fix during a personal or medical emergency.
During such instances, time is of the essence. Taking a personal loan in Singapore will be the most viable option during such emergencies.

What Can A Short Term Personal Loan Be Used For?

Here are a few ways to use a short term personal loan.

For Loan Repayments

A short term personal loan can be used to pay off high-interest debt. For example, you can use that money to pay off your credit card bills and get a fresh financial start.

But only borrow what you are absolutely sure you can afford to pay back to avoid getting stuck in a debt cycle.

Miscellaneous Expenses

You can also use a short term personal loan for daily necessities such as:

  • Grocieries
  • Rent
  • Utility bills
  • Personal upkeep
  • Home or vehicle repairs
  • Medical expenses

Interest Rates Of Short-Term Personal Loans

Remember that short-term personal loans have much higher interest rates than long-term loans. The interest rate of your short-term loan is dependent on the following factors:

The Lender You Choose

The interest rate of a personal loan will depend on the lender you’re dealing with.

Licensed money lenders charge a monthly interest rate of 4% on personal loans. Banks often charge lower interest rates per annum, but are likely to take longer to approve your application. So the question is: Can you afford to wait?

Processing Fee

This is a hidden cost that is deducted from the principal amount. As such, it is included in the official interest rate. Be sure to factor this in.

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, this fee is included in the EIR.

Effective Interest Rate (EIR)

The EIR refers to the total interest you have to pay on your personal loan. It includes processing fees and factors in your repayment schedule.

You should look at the EIR when choosing a loan as it is a better reflection of your interest rate.

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

Pros And Cons Of A Short Term Personal Loan

Here are the advantages and disadvantages of applying for short-term loans in Singapore.



In general, short-term personal loans are convenient to get. As the loan amount is often quite small, such loans do not have a long list of requirements.

As mentioned earlier, some licensed money lenders may approve your short term personal loan within a few hours of receiving the application.

Easy To Access

The application process is simple. Most licensed money lenders, banks, and other financial institutions offer online applications these days. You can also apply in person if you prefer.
You are likely to get your loan on the same day you apply for it or visit a money lender. Banks may take longer.

This makes it easy to access these short-term loans. Thanks to digitalisation, you can apply for a short term personal loan from the comfort of your couch.

But remember that all licensed money lenders in Singapore require applicants to visit their outlets for verification. This mandatory face-to-face exercise helps to minimise fraud cases.

In addition, the face-to-face encounter with a borrower gives lenders a chance to explain the loan terms in detail.

They Are Flexible

Short-term loans can be used for any purpose. You can also choose how you want to repay the loan. In most cases, you will be given the option to repay weekly, bi-weekly, or monthly installments.

Whichever repayment option you choose, a short term personal loan in Singapore offers you a degree of flexibility.

Lower Barriers To Entry

Owing to the small amount and short loan tenure of short-term loans, licensed money lenders tend to focus more on your annual income and repayment ability than your credit score. However, this is not the case for banks.


High Interest

Despite their convenience, short-term personal loans usually come with high interest.

Because the loan tenure is usually short (a few months to a year), lenders will charge more interest for providing this service.

Easy To Be Complacent

Because of how easy it is to get the loan, the small amount, flexible repayment schedule, and its short duration, it is easy to become complacent.

Some may even forget they have a loan and go ahead to apply for another, thinking they can repay the loans easily.

May Fall Prey To Loan Sharks 

Those who need money urgently may get deceived by loan sharks and fraudsters pretending to be licensed money lenders.

Loan sharks may grant loans quickly (and remotely) to desperate borrowers. But they will hike up the interest rate and charge hidden fees, making the debt impossible to repay.

Risk Of Being Stuck In A Debt Cycle 

Those who take a short term personal loan lightly and do not pay up on time every month may find themselves being charged late fees, causing the debt to snowball.

Worse, they may resort to taking new loans to pay off the existing debt and eventually get stuck in a debt cycle.

How To Choose The Right Repayment Plan

When your short term personal loan has been approved, you need to know when and how you’ll pay the installments.

As mentioned, you can choose weekly, bi-weekly, or monthly payments. Whichever repayment option you choose, make sure you stick to it until you finish paying off your debt.

Your monthly income should be the first determinant of when and how much you will repay in installments.

Note that if you agree on a shorter tenure, it will mean you more in terms of installments every month, but if you settle for a longer loan tenure, you will pay more in interest overall.

So think carefully before you apply for a short term personal loan.

How Long Should The Loan Tenure Be?

Usually, short-term personal loans in Singapore give you a year to repay but a lender may shorten or extend the loan tenure.

So before you apply for a short term personal loan, make sure you agree to its terms and conditions.

Where To Get A Short-Term Loan

There are three main sources of short-term loans in Singapore – namely banks, licensed money lenders, and private funders.

Banks: Often the first option for borrowers, banks can give short-term personal loans to distressed borrowers but they are usually strict. The bank also takes a while to process applications.

Licensed money lenders: Licensed money lenders are allowed to issue secured and unsecured loads, including short-term loans – as long as they abide by the laws and regulations of the Moneylenders Act.

Singaporeans, permanent residents, and foreigners can borrow up to six months’ of their monthly income if they earn more than $20,000 yearly.

Private funders: Such funders advance short-term loans to investors and businesses. They are excluded from holding a license under the Moneylenders Act.

To qualify for a loan as an individual, you must:

  • Have net personal assets of $2 million in value, of which the value of your primary residence must not exceed $1 million
  • Have net assets exceeding $1 million
  • Have made at least $300,000 in the preceding 12 months

To qualify for a loan as a business, you must have net assets exceeding $10 million. You may need to provide collateral.

Consider If You Can Repay A Short Term Personal Loan

If you have decided to get a short term personal loan, visit Lending Bee.

We are a trusted licensed money lender in Singapore that offers some of the most affordable interest rates and fees.

Our loan officers will help you find a short term personal loan with a reasonable interest rate and repayment schedule, and offer useful tips and insights.

Contact us today or apply for a loan using your Singpass now. The entire process only takes five minutes.

About Ashley Sim

Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.