What is a Short Term Unsecured Loan?

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  • Written By: B. Miller
  • Edited By: Andrew Jones
  • Last Modified Date: 10 November 2018
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A short term unsecured loan is a loan made to an individual in which the amount of money loaned is not secured by any collateral, such as a car loan or a home loan. A short term unsecured loan is generally truly short term, and the balance may be due anywhere from two weeks to 90 days after the money is received, typically no longer than 90 days. This is a type of personal loan, but it is usually obtained from a relatively high-risk lending company rather than a bank, and is usually an option of last resort if an emergency occurs.

The most well-known type of short term unsecured loan is a payday loan or payday advance. An individual might visit the lender with a previous pay stub, for example, and will receive a loan in advance in the amount that he or she anticipates receiving on payday. Once payday comes, the individual can then repay the loan in full, plus interest. Interest is one of the largest downsides of a short term unsecured loan. Given the choice, most experts will recommend applying for a personal loan at a bank and securing it with some form of collateral in order to get the best interest rates.


Since there is no collateral to guarantee repayment of a loan, the interest rate on a short term unsecured loan is often astonishingly high. This is why many people will only take this type of loan as a last resort, if they need cash quickly in case of an emergency, such as a medical emergency or to make repairs on a car or home, for example. There are some benefits to a short term unsecured loan, however, that make them a good choice for people with a slightly questionable credit history.

First, credit score is not often taken much into account when applying for a short term unsecured loan. In some instances it will be, but in most cases the loan is issued based simply on an application and a pay stub, as well as proof of identity such as a driver's license. In addition, the funds from a short term unsecured loan will typically be given to the borrower within a 24 hour period, often within just a few hours of making the application; there is no need for a lengthy application process, credit check, or other information that is usually required when applying for any other type of loan.



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