What Can You Use A Short Term Personal Loan For?

Written by Shannon Wong on October 12, 2022

A short term personal loan is used for various personal expenses, including being a lifeline during emergencies. 

A personal loan can also be used to pay for home improvements or to pay off a high-interest credit card debt.

The application process is not tedious, and the approval is generally fast. However, it can be costly due to the high interest rates and if repaid over a long period. 

Yet you are not required to avail collateral to secure the borrowed amounts.

If you are in need of a short-term loan, this guide has everything you need to know about the uses of a personal loan in Singapore and how to choose the right repayment.

What Is A Short-Term Loan?

Short-term loans in Singapore are obtained from banks or authorised money lenders for a shorter repayment duration, usually less than a year. 

Depending on the type of short-term loan provided, some lenders may also classify a duration of fewer than two years as short term. 

This loan is also unsecured, so you won’t be required to provide any form of collateral to the lender.

The different short-term loans available include: 

  • Payday loan
  • Merchant loan
  • Payroll loan
  • Bridging loan
  • Line of credit

A short-term loan’s repayment schedule varies according to the borrower’s ability to pay. Hence, your monthly income is a key factor to consider. 

The repayments will be made in installments every month or on payday.

Interest Rate Of Personal Loans

Money lenders in Singapore are only allowed to charge an interest rate of no more than 4% per month for personal loans. 

This applies regardless of your monthly income or whether the loan has collateral.

The interest amount is calculated monthly and based on the outstanding balance from the previous installment payment. 

Furthermore, any late interest may only be applied to the amount of any overdue installments and not to the entire loan balance.

What It Can Be Used For

Short-term loans in Singapore from legalised money lenders can be approved quickly within a day. 

This is after the money lender looks at your credit history and your annual income. Due to the speed of loan disbursement, you will be able to get the money in time to take care of your urgent needs.

When taking a personal loan, remember to compare different lenders in terms of interest and minimum tenures.  

By doing so, you will find the ideal loan that is affordable and from a licensed lender to avoid being scammed.

In Singapore, there are numerous short-term loans available. 

These loans have various purposes. They include payday loans, lines of credit, installment loans, bridging loans, etc. 

Here are some of their uses.

Emergency Expenses

Unexpected events may result in unforeseen expenses.

Instead of asking family and friends for assistance, you could apply for a personal loan to cover medical costs that are either not covered by your insurance or have exceeded your limit.

New Home Downpayment

Getting a personal loan may be wise if you’re considering purchasing a new piece of real estate, such as a home. 

You can use the cash to pay the downpayment or for an HDB loan.

Business Needs

If you want to start a business, short-term financing will help you finance inventory, acquire licences, or hire staff. 

You may also use it for acquiring goods that are in high demand during specific seasons to maximise your sales. After that, you can repay the loan in a lump sum.

Purchase Expensive Tickets

Consider getting a loan for short-term needs such as making a pricey purchase, like an expensive piece of furniture. 

This loan will help you pay for these items without affecting your monthly budget to fulfil other financial obligations.

Debt Consolidation

This involves taking a personal loan with affordable repayment and paying off your multiple debts. 

By paying a single payment to a single lender, you not only regain your financial stability but get reprieve. 

The best thing about it is that you will safeguard and improve your credit score for future borrowing.

How To Choose The Right Repayment Plan

Short-term loans have flexible repayment plans, and depending on your income, you can choose to repay your loan over a shorter or longer tenure.

Make sure the personal loan money lender offers you a package that will enable you to make monthly payments comfortable. 

Otherwise, if the terms are unfavourable and you have to default, you might end up in a debt crisis.

Long Vs Short Tenure 

The loan tenure refers to how long you will take to repay a personal loan and interest. 

A short tenure can help you save on interest – as long as you can afford the higher installment. 

Selecting the shortest loan tenure is advisable.

Choosing an excessively long loan tenure may subject you to an early repayment penalty when you decide to clear the loan earlier than expected, yet have available funds.

However, a longer loan tenure will result in smaller repayments, giving you some allowance for additional loans.

Pros And Cons Of A Short-Term Personal Loan

The best thing about getting a personal loan is that it can help you achieve the financial freedom you want. Some setbacks might also arise.


Fast Application

These days, money lenders are now engaging with borrowers through their web portals. Hence, borrowers can now quickly and efficiently apply for short-term loans wherever they are. The process is quick and hassle-free, translating into a quick turnaround.

Easy Requirements

Short-term loans have less stringent requirements and credit checks, and don’t require collateral.

Many lenders have quick and easy application processes that make the loan easier to access. 

More importantly, the approval process is much faster than that of banks, enabling you to receive your loan as soon as the next day.

Quick Approval

Short-term loans can be approved within a day, with money disbursed the following business day. 

This is because they don’t require collateral processing, as they are perceived to be less risky.

As a result, you can have the money more quickly to meet your needs as soon as possible.

Improves Your Credit Score

Short-term loans can be used to raise your credit score. That makes you eligible for bigger and longer-term loans from money lenders and banks.


High Interest

Compared to long-term loans, short-term loans have one of the highest interest rates, making them one of the most expensive loan types. 

A bank loan has lower interest rates, depending on your credit score. However, you will have to wait for days before the bank credits you the cash.

Risk Of Scammers

It is difficult to distinguish between a licensed money lender and a loan shark for instant loans. 

Taking out a loan from a loan shark will land you in debt with extremely high interest and other hidden costs. 

Loan sharks are also taking advantage of digitisation and will seize any opportunity to lend money to unsuspecting citizens.

Default Penalties

A personal loan from a licensed money lender will attract late penalties of $60 each month when you fail to honour an installment, plus any other administrative charges.

Where To Get A Short-Term Loan

Licensed Money Lenders

The easiest way to get a personal loan in Singapore is from accredited, licensed money lenders like 1AP Capital

The good thing is that almost all of them have an online loan application portal for quickly submitting your application. 

The application will be received immediately, and the appraisal process will begin. 

Alternatively, you can apply directly to the lender by submitting a duly filled application form in person or via post to its branch. 

By using a personal loan calculator, you can determine the loan amount you should get and the most convenient monthly repayment amount by adjusting the loan tenure.


Banks are the second option for a short-term loan Singapore. Although they offer lower interest rates, their processes are slower and may impede you.

Here are some of the banks in Singapore that offer online personal loans: 

  • DBS Bank
  • HSBC Bank
  • OCBC Bank
  • UOB Bank
  • Standard Chartered Bank

Private Lenders

Private investors or lenders are restricted to lending money only to accredited investors or corporations. 

They are not covered by the Moneylenders Act and are not required to possess a licence. 

Any individual is eligible if they satisfy at least one of the following requirements: 

  • Net personal assets exceeding $2 million, of which the primary residence’s value shall not exceed $1 million
  • The previous year’s income was at least $300,000
  • Net financial assets worth more than $1 million

A Short Term Personal Loan Has Many Uses

One of the best things about short-term personal loans is that you can use them to meet your financial needs. 

You can borrow a personal loan for almost any purpose as the eligibility is less strict. 

Some ways to utilise this loan include starting a business, paying off debt, paying medical bills, or purchasing a property.

The concern most borrowers usually have is the amount of interest they will pay while repaying the loan. 

So make sure you compare interest rates from various financial institutions and money lenders.

In case you need a loan to take care of an emergency, choose 1AP Capital, one of the best licensed money lenders in Singapore, for a short-term personal loan. 

We will offer you the most affordable repayment plan in line with your income.

Contact us now or apply for a loan with us today.

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