Worried about how you will make it to the end of the month?

Short-term loans can be a lifesaver when you’re in a bind, but it’s important to understand all your options before you apply for one.  

That’s why we’ve put together this comprehensive guide on short-term loans. We’ll tell you everything you need to know so you can make the best decision for your needs. 

Find out what is a short term loan and how you can leverage it below.

What Is A Short Term Loan?

In Singapore, a short-term loan is an unsecured personal loan that can be used for various purposes, from covering unexpected expenses to financing a holiday. 

It is designed to be repaid within a few months to a year. This short tenure makes it an ideal solution for those who need access to quick cash but don’t want to be burdened with long-term debt. 

The application process is usually straightforward, and you can receive the money you need within 24 hours. However, you will get access to less cash, usually between $500 and $35,000.

Pros And Cons Of Short-Term Loans

The pros of short-term loans are many and varied. 

  • Fast approval. Loans for the short term give you access to quick cash for various situations, such as covering an unexpected expense or making a large purchase. 
  • Less overall interest. Short-term loans usually last up to 12 months. That means you will pay less interest during this time, saving money in the long run. 
  • Shorter tenures. The shorter repayment period makes these types of loans easier to manage. You will also be debt-free faster.
  • Increased flexibility. Many lenders offer flexible repayment options for short-term loans, which can be valuable for borrowers with variable income or expenses. 

Short-term loans are not perfect, though. Here are some drawbacks to consider:

  • High interest rates. Since these are unsecured, short-term loans, lenders tend to charge higher interest rates. That means you will have to pay higher installments throughout your loan.
  • Do not suit long-term needs. They should not be used for starting a business or buying a car. 
  • High penalty fees. Rollover fees can be charged if you cannot repay your loan on time, which can add up quickly.
  • Easy to default. It is easier to default on a short-term loan, especially when you took the loan to address an emergency. Besides, if your income is inconsistent and you do not plan your budget to a T, defaulting becomes dangerously possible.
  • Easy for borrowing to become a habit. When you take a short-term loan to cover your urgent needs, you might be tempted to do that the next time. For example, if you take one payday loan now to last you until your next paycheck arrives, chances are you will do it the following month too.

Types Of Short-Term Loans

Short-term loans are not created equal. It is essential to review the differences between all these options and choose the right one:

Invoice Financing

This is a short-term business loan that allows companies to borrow against the value of their outstanding invoices. In other words, it is a way to get working capital by using your unpaid invoices as collateral. 

Invoice financing can provide the cashflow you need to keep operations running smoothly and avoid late fees or penalties. Since the loan is secured by the invoices, it often comes with lower interest rates than other business loans. 

Payday Loans

These are short-term loans where you can get quick access to cash. As its name suggest, you’ll need to repay the loan on your next payday. 

These loans can be helpful if you need money for an unexpected expense, such as a car repair or medical bill. 

However, payday loans come with high interest rates and fees, so they should only be used as a last resort. 

Lines Of Credit

This is a credit facility you get from a bank to access funds as needed. The advantage of this line of credit is that you don’t need to pay any interest until you use it.

Even then, the interest will be applied for that sum you’re taking. For example, your credit line may have a $40,000 limit. But if you use $10,000, the interest will apply to that amount.

Besides, you may get access to a larger sum of money with a credit line compared to another short-term loan.

Merchant Cash Advance

Merchant cash advances are a type of funding businesses use to get working capital. Your company sells a portion of its future sales income to the lender in exchange for an upfront lump sum of cash. 

The repayment terms are set up so that a percentage of the business’s daily or weekly credit card sales goes towards repaying the loan. 

Bridging Loans

A bridging loan is a type of short-term finance used to “bridge” the gap between two larger financial transactions. 

For example, if you are selling your old home and buying a new one, you may need to borrow money to cover the costs of the new property purchase until your old home is sold. 

In this case, the bridging loan would be used to finance the purchase of the new property and would be repaid after selling the old property. 

Emergency Cash Loans

This is a type of short-term borrowing designed to help people cover unexpected expenses. While such loans typically come with high interest rates and fees, they can be useful in a pinch. 

For example, if you need to pay for car repairs or medical bills, you may not have time to wait for your next paycheck. Just be sure to repay the loan as soon as possible to avoid getting stuck in a cycle of debt.

Alternatives To Short-Term Loans 

If you don’t want to apply for a short-term loan, there are plenty of worthwhile alternatives to consider:

  • Try borrowing from a friend or family member. This option is usually cheaper than taking out a loan, and it doesn’t put you at risk of accruing debt. 
  • Use a credit card. You may get a low interest rate on a cash advance or balance transfer if you have good credit. 
  • Negotiate with your licensed money lender or bank. If you demonstrate that you’re facing financial hardship, the lender may be willing to work with you to develop a payment plan that suits your needs. 
  • Sell or pawn a valuable asset. This asset could be anything from jewellery to electronics to a second car. If you have something of value that you can sell, it can be a quick and easy way to get the cash you need. 

Where To Apply For Short-Term Loans

There are three main places where you can apply for a short-term loan in Singapore:

Licensed Money Lenders

Money lenders are regulated by the Singapore government and must follow strict guidelines. Therefore, borrowers are protected from unfair or predatory lending practices. 

Unlike banks, they are more flexible, faster, and less interested in your credit score.

On the downside, their interest rates climb to a maximum of 4% per month, and you may borrow only up to six times your monthly income.


Taking a short-term loan from your bank has the significant advantage of paying less interest (4% per year). You may also borrow up to 10 times your monthly income on a five-year tenure.  

However, banks may delay your application and request additional paperwork. They may have other eligibility requirements related to your age or nationality.

Credit Unions

These are not-for-profit organisations that offer financial services to their members. In Singapore, credit unions typically charge lower fees and interest rates than banks. 

However, you may need to be a credit union member to apply for a loan.

How Long Does Approval Take?

The approval time differs according to your lender:

  • Money lenders: One hour for pre-approving your loan and up to 24 hours for loan disbursing, after the necessary due diligence
  • Banks: A few days to a week
  • Credit unions: 48 hours

How To Apply 

Now that you know what is a short term loan, where to apply and how long it will take to get approved, it’s time to begin the application process. 

The first step is finding the right lender. Remember to compare interest rates, fees, and eligibility requirements. 

Once you’ve found a lender that meets your needs, you can begin the application process

  • Fill in your personal information, including name, address, and income.
  • The required documentation includes: 
    • NRIC
    • Three months’ worth of computerised payslips or other proof of income (e.g. bank statements or Notice of Assessment)
    • Proof of address

Pro tip: If you’re applying online, you can use your Singpass on the licensed money lender’s website to retrieve all this information.

Once you’ve submitted your application, all that’s left to do is wait for the approval. If everything goes smoothly, you could have the cash you need within a day.

Weigh Your Options

Short-term loans can be a helpful way to get access to emergency funds. Just be sure to compare your options carefully and only borrow what you can afford to repay.

At licensed money lender Lending Bee

  • We offer some of the lowest interest rates in Singapore.
  • You can apply for a loan online in just minutes.
  • There are no hidden fees or charges.
  • You can get your money fast, typically within 24 hours. 
  • We have a high approval rate, even for those with bad credit.
  • We offer flexible repayment terms to suit your needs. 

Contact us now or apply for a loan today.

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.