What is a Short-Term Loan?

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When it’s time to consider applying for a loan, it can be overwhelming and confusing to navigate your options. We’re here to help you better understand how short-term loans work and if they may be a good option for you.

a young woman looks at short term loan paperwork

Short-term loans often are personal loans that can allow you to borrow a small sum of money. Then, you pay back the borrowed amount, and any interest, over time. Short-term loans may feature smaller borrowed amounts, from a few hundred to a few thousand dollars, that you pay back over a shorter time period than on a long-term loan. Short-term loans also may be unsecured, meaning you do not have to offer collateral. Qualifying for a short-term loan is usually dependent upon your credit history and your credit score at the time.

When to Consider a Short-Term Loan

How might a short-term loan be helpful? Unexpected or new expenses could lead you to consider borrowing options. Medical expenses or the birth of a child, a major car or home repair, a wedding or funeral, or emergencies could necessitate a short-term loan to help you cover extra costs while also making ends meet.

Types of Short-Term Loans

There are several types of short-term loans to consider depending on your income, budget, credit, and other qualifications.

Lines of Credit

If you aren’t sure how much money you need to borrow, a line of credit may be an option for you. With a line of credit, you can have access to funds as needed within a predetermined credit limit. This can be especially helpful if you aren’t sure how much an emergency expense will cost up front. You typically have the option to pay back the amount borrowed in a lump sum or in payments over time.

Payday Loans

Payday loans are short-term loans that allow you to access cash quickly and sometimes require full repayment with interest at your next payday. Payday loans can be a risky choice because the interest rates are usually much higher than other types of credit. According to the Consumer Federation of America, payday loans typically have a 400% APR or moreΩΩ. It can be a major risk to your pocketbook and possibly your credit score if you take out a payday loan and run into trouble paying it back on time. Consider this option with caution.

Installment Loans

Installment loans are a type of short-term loan that typically let you borrow a small lump sum quickly. Unlike payday loans, installment loans often have predictable weekly and monthly payments with lower interest rates. This flexibility can be helpful, but it may end up causing problems if you can’t meet the repayment deadlines.

How to Get a Short-Term Loan

You can get short-term loans from banks, credit unions and other lenders. Depending on where you choose to get your short-term loan, different loan amounts, fees, payback periods, and interest rates may apply. Qualifying for a short-term loan also typically depends on the lender. Many lenders may require information about your credit history, credit score, or verifiable income to determine if you qualify.

If you're a Huntington customer, we may have the solution for you with Standby Cash®.

Standby Cash® Access Extra Cash Instantly

We know expected and unexpected expenses can put you in a pinch. That’s why Huntington created Standby Cash, a line of credit available to Huntington checking customers. Eligibility is based primarily on your checking and deposit activity, not your credit score. Open it instantly online or in the Huntington Mobile app, and immediately access the cash you need.

Learn More

Standby Cash is a line of credit that could be available to you right now. Log into your Huntington account online or in the mobile app to see if you qualify. You could access between $100 and $500 in just a few clicks. Just pay a 5% cash advance fee when you make a transfer. Pay it back over three months and there's no monthly interest charge when you set up automatic payments. Otherwise, a 1% monthly interest charge (12% APR) applies to the outstanding balances.

To qualify for Standby Cash, you need $1,000 or more in monthly deposits to a Huntington personal checking account for three consecutive months, and an average daily balance of $200 or more in your checking account. Other eligibility requirements apply, including your recent overdraft and/or return history. Qualifying for Standby Cash is based primarily on your checking and deposit history, rather than your credit score. Once you open Standby Cash, you can instantly transfer cash to your checking account. And you're eligible to make transfers as long as you continue to meet the requirements. The account and your activity are reported to credit reporting agencies, so your use could positively or negatively affect your credit score.

While Standby Cash is not overdraft protection, Huntington customers can leverage it to help clear up an overdraft. If you believe you are going to overdraw your account, you can use Standby Cash and make a transfer to prevent the overdraft from occurring. If you do not bring your account positive while 24-Hour Grace is in effect (before midnight central time the next business day), your Standby Cash line will be suspended from further use until your account is no longer negative. So, make sure to keep an eye on your finances and avoid overdraft and return transactions.

Advantages and Disadvantages of Short-Term Loans

Short-term loans are an opportunity to cover extra or unexpected costs without cutting into your budget. However, there can be drawbacks to taking out a short-term loan rather than raising funds in other ways.

When deciding to take out a loan, always consider your monthly income and budget. This can help you determine the amount you’ll need for your short-term loan and which type might be right for your circumstances. Also make sure you understand the terms of your repayment plan and that you will have the means to cover it.

Short-term loans may require a higher monthly payment than other lending options, which can put extra stress on your budget. Depending on the type of short-term loan you choose, you might also encounter fees that require payment upfront or high interest rates.

Features short-term loans can offer include quick access to borrowed cash, a typically faster application process, and a relatively easy qualification process.

Related Content

ΩΩ Consumer Federation of America. https://paydayloaninfo.org/facts. 2020.

The information provided in this document is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering financial, legal, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.

Third-party product, service and business names are trademarks/service marks of their respective owners.

Standby Cash® and 24-Hour Grace® are federally registered service marks of Huntington Bancshares Incorporated. The 24-Hour Grace® system and method is patented. U.S. Pat No. 8,364,581, 8,781,955, 10,475,118, and others pending. Standby Cash is patent pending.

  Standby Cash is subject to terms and conditions and other account agreements. A cash advance fee equal to 5% of the amount of the cash advance will be collected from your Eligible Deposit Account immediately after the cash advance is deposited in that account. A 1% monthly interest charge (12% Annual Percentage Rate) will be added to outstanding balances if automatic payments are not scheduled. Available through online banking or the Huntington Mobile app to individuals with an active Huntington consumer checking account with at least three months of consistent deposit activity of $1,000 or more, and an average daily balance of $200 or more over the last 30 days. An active or recent bankruptcy or other legal process may disqualify you. Other eligibility requirements apply, including your recent overdraft and/or return history, regardless of whether you are charged overdraft fees or have transactions returned or they are waived with our 24-Hour Grace® and $50 Safety Zone® services. We reserve the right to change eligibility criteria at any time. Line amount and/or ongoing availability may vary based on changes to your deposit activity, average daily balance, and number and length of overdrafts and/or returns on any of your Huntington deposit accounts. When any of your Huntington deposit accounts are in an overdraft status for more than one day, your Standby Cash line may be suspended until they are no longer negative. If 90% or more of the approved credit line is drawn three months in a row, Standby Cash will be suspended until it’s paid to a zero balance. Business checking accounts are not eligible for Standby Cash.