Helpful Tips On Repayment For Short Term Loan

By:    Updated: March 14,2017

In a perfect world, you should never need to take out a short term loan. However, if you find yourself in a financial pinch and you need money quickly, you might end up taking on some short term debt. Short term loans can be used to cover periodic cash flow gaps. However, because short term loans are generally unsecured (which means there is no underlying asset supporting the loan), they tend to have relatively high rates of interest when compared to secured loans such as mortgages. Therefore, you should carefully consider all of you options before taking out a short term loan. If you do decide to take on short term debt, there are some best practices for short term loan repayment that you should know about.

Types Of Short Term Loans

Before discussing some best practices for short term loan repayment, we should first examine the main types of short term loans.

Payday Loans: A payday loan is a cash advance on your next paycheck. They are relatively easy to obtain (usually there is no credit check) and you can receive the money quickly. However, the interest rates and fees associated with these loans can be staggering. You will also have to pay large penalties if you do not pay off the loan in time. Payday loans are available from online lenders as well as in person.

Credit Card Cash Advance: A credit card cash advance is essentially a loan from your credit card company. To receive the money, you can use your credit card to pull out cash at an ATM. Credit card cash advances are expensive. In addition to paying a large fee, you will also have to pay a substantial interest rate on the amount borrowed.

Personal Loans: A personal loan is an unsecured loan made to you by a bank, financial institution or individual. As with the other types of short term debt, interest rates on personal loans are relatively high. There is generally a fixed term during which the loan must be repaid. It can be repaid in installments or all at once. Popular online lenders for personal loans include and which both connect individual borrowers with individual lenders.

Credit Cards: Credit cards are the most popular form of short term debt. While introductory interest rates can be low, they skyrocket once the introductory period has passed. Credit card companies hand out penalties if you do not make the minimum payment each month. You also have to pay interest on carryover balances that are not paid off at the end of the month.

Tips On Repaying Your Short Term Loans

Repay The Debt As Soon As Possible: Because short term loans generally have high interest rates, it is in your best interest to repay them as soon as possible to reduce your overall interest costs. Therefore, make sure you have a repayment plan set up before you take out a loan.

Stop Taking On More Debt: It seems obvious, but it is often easier to say than to do. If you have short term debt, do not add additional debt until you have repaid your current debt. Taking on additional debt could hamper your ability to repay your current short term debt.

Ask Your Family And Friends For Help: You might have to swallow your pride, but getting financial help from your family and friends can prevent your financial situation from getting worse. Consider setting up a personal loan with a friend or family member. You can use the funds to repay your short term debt which will prevent you from incurring further interest charges and fees.

Consider Refinancing Your Short Term Debt Into Lower Interest Debt: One way to get rid of your high interest short term loan is to refinance it into lower interest debt. For example, if you own your own home, you might consider taking out a home equity line of credit in order to pay off your short term loan. While you will still have to pay off the debt on the home equity line, your interest rate will be significantly lower and you will likely have more time to pay it off.

Ask Your Employer For A Pay Advance: Some employers may be willing to give you a paycheck early. If you have a short term loan with a significant interest rate, you might want to ask your boss if you can receive an early paycheck. You can then use those funds to pay off your short term loan.


The key takeaway about short term debt is to repay it as soon as possible. This will help you to avoid excessive expenditures on interest payments. If you follow the tips discussed in this article, you will ensure that your financial situation does not deteriorate as a result of taking out short term debt.

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