Many people have been in a financial crisis and had to race against time to get cash. Considering a short term personal loan can be an ideal option.

If you are thinking about applying for a short-term personal loan in the near future, we will walk you through the most important aspects to consider when doing so, as well as how these loans operate in the context of Singapore, and the diverse uses to which you may put such loans.

If you are thinking about applying for a short-term personal loan in the near future, you are at the right place.

In addition, we will look into the interest rates that are associated with short-term loans, highlight the advantages and cons of these loans, and lead you in the direction of the sources where you may acquire loans like these in Singapore.

What is a Short-Term Personal Loan in Singapore?

A short-term personal loan refers to an unsecured borrowing arrangement, typically involving amounts ranging from a few hundred to less than S$35,000.

Due to the urgency often associated with such loans, licensed money lenders in Singapore are known to provide swift approvals on the same day as the application.

While the approval process is expedited, licensed money lenders and banks in Singapore will assess certain key factors, including your annual income and credit history, before granting a short-term personal loan.

These short-term loans are categorised as straightforward financial products, often structured for repayment through regular installments.

Typically, the standard duration for the repayment of short-term personal loans is set at 12 months, though some lenders may offer extended terms of up to two years.

In Singapore, short-term loans can serve as a prompt financial solution, particularly in cases of personal or medical emergencies where time sensitivity is crucial. Opting for a personal loan during such exigencies is a practical choice.

What Are Some Possible Applications for a Personal Loan with a Short-Term Duration?

Here are a few different applications for a personal loan with a short duration.

Using Short-Term Personal Loans for Various Needs

Debt Settlement

Consider a short-term personal loan as a practical solution for paying off high-interest debts. For instance, it can be employed to eliminate outstanding credit card bills, offering a clean slate for a fresh financial beginning. However, exercise caution and borrow only what you need to avoid getting into a debt trap.

Miscellaneous Expenses

Short-term personal loans can also cater to essential day-to-day needs, including:

  • Grocery needs
  • Rent payments
  • Utility bills
  • Personal maintenance expenses
  • Home or vehicle repairs
  • Emergency expenses or Medical bills

These loans provide a versatile financial tool for managing a range of immediate financial requirements.

Read also: What Can You Use A Short Term Personal Loan For?

Understanding Interest Rates on Short-Term Personal Loans

It’s crucial to recognise that short-term personal loans typically carry higher interest rates compared to their long-term counterparts. The interest rate associated with your short-term loan hinges on several key factors:

Choice of Lender

The interest rate on your personal loan is contingent upon the lender you opt for. Licensed money lenders in Singapore often impose a monthly interest rate of 4% on personal loans. Banks, on the other hand, generally offer lower annual interest rates, but their approval processes tend to be lengthier. You’ll need to consider whether you can afford to wait.

Processing Fee

This cost is deducted from the principal loan amount and is integrated into the official interest rate. For instance, if you secure an S$10,000 loan with a 1% processing fee, you’ll receive S$9,900, with S$100 subtracted as the processing fee. Importantly, this fee is factored into the Effective Interest Rate (EIR).

Effective Interest Rate (EIR)

The EIR encompasses the total interest you’ll pay on your personal loan. It takes into account processing fees and your repayment schedule. When selecting a loan, it’s advisable to focus on the EIR, as it offers a more comprehensive view of your actual interest rate.

Read also: Effective Interest Rate (EIR) in Personal Loan in Singapore: What is It?

Other variables influencing the interest rate of your short-term personal loan include your income, credit score, the loan tenure, and the loan amount. These factors collectively determine the overall cost of your short-term borrowing.

The Pros And Cons Of Getting A Personal Loan With A Short Term

The following is a discussion of the positive and negative aspects of applying for a short-term loan in Singapore.



Short-term personal loans are typically convenient to secure due to their smaller loan amounts, which entail fewer stringent requirements. Some licensed money lenders may even approve your application within a few hours of submission.

Ease of Access

The application process is straightforward, with many licensed money lenders, banks, and financial institutions offering online application options. In-person applications are also available if preferred. Generally, you can expect loan disbursement on the same day as application, enhancing accessibility.

Digitalisation has made it possible to apply for a short-term personal loan from the comfort of your home. However, it’s important to note that licensed money lenders in Singapore require in-person verification, which helps prevent fraud and allows lenders to provide detailed explanations of the loan terms.


Short-term loans offer versatility in terms of usage and repayment. Borrowers often have the choice of weekly, bi-weekly, or monthly installments, enhancing flexibility to suit individual financial situations.

Lower Barriers to Entry

The focus of licensed money lenders on annual income and repayment ability, rather than credit scores, makes short-term loans more accessible for borrowers. This is in contrast to banks, which typically place greater importance on credit scores.


High Interest

Short-term personal loans tend to come with higher interest rates due to their shorter loan tenure. The compact duration prompts lenders to charge higher interest, increasing the overall cost.

Complacency Risk

The ease of obtaining a short-term loan, coupled with small loan amounts and flexible repayment schedules, may lead some borrowers to become complacent. They might overlook existing loans when applying for new ones, mistakenly assuming they can easily repay the debts.

Potential to Fall Victim to Loan Sharks

Urgent financial needs can expose borrowers to loan sharks and fraudsters posing as licensed money lenders. Loan sharks often provide quick and remote loans but impose exorbitant interest rates and hidden fees, trapping borrowers in unmanageable debt.

Read Also:Loan Shark Harassment in Singapore: How to Deal with Loan Sharks?

Risk of Entering a Debt Cycle

Borrowers who fail to make timely monthly payments may incur late fees, causing their debt to spiral. This may compel them to take out new loans to settle existing debt, leading to a cycle of escalating indebtedness.

How to Determine the Best Repayment Strategy for Your Short-Term Personal Loan?

Once you have received approval for your short-term personal loan, it is imperative that you figure out how and when you will make your repayments on the loan.

You will have the ability to choose between weekly, bi-weekly, or monthly payment plans, as was described earlier. No matter the path you choose, it is imperative that you remain dedicated to it throughout the entirety of the repayment process.

Your average monthly income should be the major consideration that goes into designing your repayment strategy. It acts as the basis for defining the frequency of your installment payments as well as the total amount of each one.

It is important to keep in mind that opting for a loan term that is shorter will result in higher monthly installment payments, whilst opting for a loan term that is longer will result in a higher overall interest cost. Therefore, before to asking for a short-term personal loan, it is a good idea to give some thought to the loan conditions that you would prefer, making sure that they are in line with your financial capacity and the goals that you have set for yourself.

Determining The Appropriate Loan Tenure

In Singapore, short-term personal loans generally come with a standard one-year repayment period. However, it’s important to note that the loan tenure can be adjusted at the discretion of the lender, either shortened or extended to accommodate specific situations.

Before proceeding with your application for a short-term personal loan, it’s imperative to carefully review and consent to the loan’s terms and conditions. Ensure that the specified loan tenure aligns with your financial requirements and is agreeable to you.

Exploring Sources Of Short-Term Loans

Short-term loans in Singapore can be obtained through three primary sources: banks, best money lenders, and private funders.


Banks are a conventional choice for borrowers seeking short-term personal loans. While they may provide such loans to individuals facing financial distress, banks often impose stringent lending criteria and can have extended application processing times.

Licensed Money Lenders

Licensed money lenders operate within the legal framework of the Moneylenders Act and are authorised to issue both secured and unsecured loans, including short-term loans. Singaporeans, permanent residents, and foreigners can borrow up to six months’ worth of their monthly income if their annual earnings exceed S$20,000.

Private Funders

Private funders extend short-term loans primarily to investors and businesses. They are exempt from holding a license under the Moneylenders Act. To qualify for an individual loan from private funders, you generally must meet the following criteria:

  • Possess net personal assets valued at S$2 million, with the value of your primary residence not exceeding S$1 million.
  • Have net assets exceeding S$1 million.
  • Have earned at least S$300,000 in the preceding 12 months.

For businesses seeking loans from private funders, they typically need to demonstrate net assets exceeding S$10 million and may be required to provide collateral as security.

Ready to secure your short-term personal loan? Explore MoneyIQ’s loan matching platform now and get the financial support you need.

Published On: October 13th, 2023

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