Everything You Need to Know About Short Term Loans

If you’re in a pinch for some extra dough, but don’t have the credit history for one of those snazzy rewards cards, or a loan from your bank, a short term loan may be the solution. While most personal loans have repayment terms of at least 12 months, short term loans give you repayment options of anywhere from 2 to 12 months.

Having no credit history has the annoying effect of making it damn near impossible to get a loan, and it can seem impossible to get your foot in the door in building your credit history. The same is true for borrowers with poor credit scores – your options are severely limited, and finding a lender willing to extend a loan to you can be difficult.

Short term loans have the added benefit of often coming without a credit check, so people with bad or empty credit history actually have a shot at getting one. But it’s not all sunshine and rainbows with short term loans – there are some strings attached. I’ll fill you in on some of the givens, and things to watch out for when shopping around for a no credit check loan.

#1 – Interest Rates

It’s unfortunate, and pretty unavoidable; with any short term no credit check loan, you’re probably going to see some pretty high interest rates. These loans are marketed specifically towards borrowers that are considered high risk, and often don’t qualify for more affordable loans. The sucky catch22 is that the less you can afford, the higher your interest often is.

Make sure to take the interest rates into account before signing a short term loan contract. These rates can often be between 30% and 60% of your balance, and even higher with some lending agencies. Just keep your monthly payments low, and try to pay off your balance as quickly as possible to avoid letting those interest rates clean you out.

#2 – Early Repayment Penalities

What?? But I thought they wanted me to pay off my loan?

Wrong. They may want you to pay off that loan, but they don’t want you to do it too quickly. Lenders make the majority of their money from interest rates and fees, and the faster you pay down your balance, the less they stand to skim off the top.

For this reason, a lot of lenders work early repayment penalties into their short term loan contracts. This means that if you pay off the loan before the terms of your agreement are up, you can actually be hit with a sizeable fee, designed to help the lender recoup the interest they would have made off of you.

The moral of the story? With any loan, but especially a short term loan with no credit checks, make sure they don’t penalize you for paying off your balance ahead of schedule.

#3 – Down Payments

Just like with any other loan, a fast cash or short term payday loan is going to usually require some kind of a down payment. Since these loans often come with no credit check, you’re usually considered a pretty high risk customer, and they’re going to want a sizeable down payment to secure your line of credit.

The key here is to make sure you can afford the monthly payments + interest, as well as a chunk of change for the down payment. This is usually around 30%-50% of the balance of your loan, but can vary a lot depending on your lender.

#4 – Credit Reporting

If you’re looking into this type of loan, chances are your credit isn’t the greatest. Hey, don’t sweat it. We’ve all been there, and everyone’s gotta start somewhere. Short term loans are great for improving your credit score, because they are accounts that are usually open and shut in well under 12 months. As you make on time payments, your credit score improves, giving you a better chance for lower interest rates and down payments in the future.

However, keep in mind that getting in over your head with one of these loans can be pretty financially catastrophic. If you default on one, negative things on your credit report take seven years to fall off, even after you’ve settled the debt.

#5 – Late Payment Fees

Speaking of defaulting, make sure that you stay on top of those payments. Not only is it great for your credit score, but it will help you avoid the dreaded late payment fees. These can be up to around $100, and compounded with missed payments with interest can really set you back. Stay on top of things, and don’t even go down that road.


Short term loans with no credit check are a great way to get your foot in the door and start building your credit. Use a little budgeting sense, manage your monthly payments, and know what you’re signing up for. If you do all of those things, you can make one of these loans work for you.