What Is A Short Term Loan And Where To Get One

Guest Contributor

Guest Contributor

Last updated 13 July, 2022

Short term loans are becoming increasingly popular in Singapore when people find themselves needing quick cash.

A short term loan is a type of personal loan that is typically repaid within a year. Short term loans are usually used for short term financial needs, such as covering unexpected expenses or bridging the gap between paychecks. A short term loan usually ranges from as little as S$100, up to S$100,000. On the other hand, long term loans are typically repaid over the years and are used for larger purchases such as a home or a car.

There are a few things to consider before taking out a short term loan:

  • Short term loans tend to have higher interest rates than long term loans. You will need to repay the loan plus interest within a shorter time frame.
  • Short term loans may not be available from all lenders. Some lenders only offer short term loans to people with good credit, while others may not offer such options at all.
  • You should only take out a short term loan if you are confident that you will be able to repay the loan on time.

Examples of short term financing include lines of credit, business credit cards, and merchant cash advances. Examples of long term financing include loans from commercial banks, bonds, and equity financing. 

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Pros and cons of short term loan

If you're thinking of getting a short term loan in Singapore, first, it’s important to weigh the pros and cons.


  • Less costly in the long run: In general, short term loans are less expensive than other loans in the long run. Short term loans typically have lower interest rates than banks or other financial institutions considering they accrue over a shorter period. 
  • More flexible repayment terms: Short term loans tend to have more flexible repayment terms than other loans. This means that you can choose to repay your loan over a shorter or longer period, depending on your financial situation.
  • Can help improve your credit score: If you make all of your short term loan repayments on time, this can help improve your credit score. This can be beneficial if you’re looking to take out a larger loan in the future.
  • Accessibility: In Singapore, you may apply for a short term loan from banks and regulated moneylenders. Borrowers in Singapore may apply for short term loans online in minutes. As a result, short term loans are among the most widely available forms of credit in Singapore.


  • Processing fee: Short term loan providers will typically charge a processing fee. This is a one-time fee charged when you first take out the loan. 
  • Late payment fees: You’ll typically be charged a late payment fee if you miss a short term loan repayment. This is usually a percentage of the outstanding loan amount, plus an administrative fee.
  • Higher interest rates: The interest rates charged on short term loans are typically higher than those charged on other loans. This is because short term loans are considered a high-risk form of credit. This means that you should only consider taking out a short term loan if you’re confident that you’ll be able to repay it in full and on time.
  • Opportunity for loan sharks: If you’re not careful, you could take out a short term loan from a loan shark. Loan sharks are illegal money lenders who charge interest rates and levies that are prohibitively expensive. They may also use intimidation tactics to collect payments.

If you're planning on taking out a short term loan, do your research and only borrow from a licensed moneylender.

What are the various types of short term loans available in Singapore?

Here is a brief overview of the most popular types of short term loans:

Lines of Credit

A line of credit is a short term loan that you can take out and use as needed. You can think of it as a revolving door of short term loans: you can borrow money up to your credit limit, repay it, and then borrow again up to your limit. This makes lines of credit a great option for covering unexpected expenses or taking advantage of opportunities as they arise.

Lines of credit typically have lower interest rates than other types of short term loans, like payday loans or cash advances. They also tend to have higher credit limits than credit cards. Keep in mind that lines of credit usually come with fees, including an annual fee, a processing fee, and sometimes a maintenance fee.

Merchant Cash Advances

If you are a small business owner in Singapore, you may have come across “Merchant Cash Advance” (MCA). A merchant cash advance is a short term loan perfect for businesses with high credit card sales. With a merchant cash advance, you can get funding based on your future sales, which means getting the money you need without putting up any collateral.

If you’re considering a merchant cash advance, keep a few things in mind. First, merchant cash advances typically have higher interest rates than traditional loans, so you’ll need to make sure that you can afford the payments. Second, because they are based on future sales, merchant cash advances are best for businesses confident in their future growth. If you’re unsure about your business’ future, a merchant cash advance may not be the right choice.

Payday Loans

One of the most common sorts of short term loans is payday loans. They're usually used to cover unforeseen bills or get individuals through till their next salary. Payday loans usually have to be repaid in full, plus interest and fees, on your next payday. This can be a lot of money to find at once, so make sure you can afford it before taking out the loan.

Invoice Financing

If you are a business owner in Singapore, you’ve probably heard of invoice financing. Invoice financing is a short term loan that is based on your outstanding invoices. In other words, it is a way for you to get funding by using your unpaid invoices as collateral.

There are two main types of invoice financing:

  • Accounts Receivable Financing: This is when a lender gives you a loan based on your outstanding invoices. The lender will then collect the payments from your customers on your behalf.
  • Invoice Factoring: This is when you sell your outstanding invoices to a lender at a discounted rate. The lender will then collect the payments from your customers.

Invoice financing can be an excellent way for business owners to get the funding without going through the traditional bank loan process.

Online or Instalment Loans

As the name suggests, this type of loan is obtained through an online lender, and it can be used for various purposes. One advantage of online loans is that they tend to be much easier in terms of eligibility than traditional bank loans. Another advantage is that they can be paid back over time in smaller instalments, making them more affordable for many borrowers.

However, one downside of online loans is that they often come with high-interest rates. Before taking out an online loan, it’s important to compare offers from multiple lenders and carefully go over the terms and conditions.

Bridging loans

A bridging loan is a type of short term funding used to “bridge” the gap between purchasing one property and selling another. In other words, it allows borrowers to buy a new property before they have sold their old one. Bridging loans are often used by people who are moving house or looking to buy a property at auction. 

They can also be used for business purposes, such as funding the purchase of commercial premises or equipment. Bridging loans are typically secured against property, which means that they come with a higher level of risk than other types of finance. As a result, bridging loans usually have higher interest rates and shorter repayment terms than other types of borrowing.

Where can you get short term loans in Singapore?

There are a few different places to get short term loans in Singapore. You can go to a bank, licensed moneylender, private funders, and pawnshops. Each of these options has its own set of pros and cons that you should consider before taking out a loan.

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There are numerous short term loan options available in Singapore, and one of the most popular is through banks. Banks typically offer two types of short term loans – overdrafts and unsecured loans.

Overdrafts are a type of short term loan that is linked to your bank account. This means that you can only borrow up to a specific limit, typically set by the bank. An overdraft allows you to borrow money when your account balance is running low and can be a handy tool in managing your finances. The main downside is that it usually comes with high interest rates. This means that you will pay more in the long run if you do not repay your overdraft quickly.

On the other hand, unsecured loans are not linked to your bank account. You can borrow a larger sum of money, but you will also have to pay back the loan with interest. Unsecured loans are typically used for larger purchases, such as a new car or home renovation. The main advantage of an unsecured loan is that it usually comes with lower interest rates than an overdraft. However, you will still need to have a good credit score to be eligible for an unsecured loan.

Licensed moneylenders

If you are looking for short term financial assistance in Singapore, one of the options you can consider is to take up a loan from a licensed moneylender. Licensed moneylenders are regulated by the Ministry of Law and must adhere to strict guidelines set out by the Moneylenders Act. This means they cannot charge exorbitant interest rates or fees and must provide borrowers with clear information about the loan terms and conditions.

There are different types of short term loans available from licensed moneylenders in Singapore, so you can choose the one that best suits your needs. A payday loan is a short term loan example that you can take out if you need a small amount of cash for an emergency expense. If you need a larger amount of money and can afford to repay it over a longer period, you can apply for a loan.

Pawn shop

When people think of short term loans, they often think of high interest payday loans.  However, other options are available that may better fit your needs. One option is to get a loan from a pawn shop.

Pawn shops have been around for centuries and are one of the oldest ways to get a short term loan. They work by allowing you to use your valuables as collateral for a loan.

If you don’t repay the loan, the pawn shop will keep your item and sell it to recoup their losses. The government regulates pawn shops, so you can be sure that you’re getting a fair deal.

There are many different personal loan options available in Singapore. Depending on your needs and credit score, some loans may better fit you than others. Check out our comparison of the best personal loan interest rates at Singsaver to choose what suits your situation.



Use a personal loan to consolidate your outstanding debt at a lower interest rate!

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