How To Use A Short-Term Loan To Tackle Any Expense

How To Use A Short-Term Loan To Tackle Any Expense

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated November 4, 2022

Unfortunately, life isn’t always easy and it’s difficult to predict what’s going to happen to us down the road. Most of us have a basic idea of where we’ll be in the years to come, but the fact is, anything can happen. Some expenses are just too large to justify draining all of your savings. So, in the event that an emergency does arise, it’s always good to know what financial options are available to help you out.

If you’ve just experienced an emergency and need a bit of quick cash, a short-term installment loan might be a good option. 

What Is A Short-Term Installment Loan?

Generally speaking, a “short-term” loan refers to the process of borrowing a moderate amount of money with the intent of paying it back within a relatively short period of time, usually within  6 months to three years. Loans are granted by various types of creditors, such as banks, credit unions and subprime lenders (for those who don’t qualify at a bank). There are a variety of general loans that come in all shapes and sizes. Short-term loans, however, are usually for $5,000 or under. 

Can You Use A Short-Term Loan To Tackle Any Expenses?

Yes, you can use a short-term loan to cover whatever expenses you’d like. In fact, you can use a short-term loan for almost any type of emergency, such as:

  • Repairs on your home (leaky roof, damaged appliances, etc.)
  • To finance a new vehicle when yours breaks down.
  • Repairs on your current vehicle (accidents, mechanical procedures, etc.)
  • Medical bills (prescription medication, dental costs, etc.)
  • Groceries and other household supplies
  • To finance your or someone else’s education (tuition, school supplies, etc.)

Where Can You Get A Short-Term Emergency Loan?


Loans Canada

Up to $50,000
2.00% to 46.96%
3-60 months


$1,000 - $15,000
29.9% - 46.9% APR
12 - 60 months

Symple Loans

$5,000 - $50,000
6.99% - 22.99%
Up to 84 Months

Spring Financial

Up to $15,000
14.99% to 46.96%
6 - 12 Months


$1,000 - $25,000
7.5% - 31.5%
36 - 60 months

Cash Money

$1,500 – $10,000
Varies by province
Varies by product (up to 60 months)


$5,000 - $35,000
Starting at 9.99%
6 - 60 Months

Loan Away

Up to $5,000
19.9% to 45.9%
6 - 36 Months


$500 - $1000+
28 to 32%
3 Months

Consumer Capital Canada

$500 - $12,500
19.99% to 34.99%
No minimum term

Mogo Finance

$300 – $35,000
9.9% - 47.72%
3 - 60 Months

Fairstone Financial

Up to $50,000
19.99% - 39.99%
6 - 120 Months

Types Of Short-Term Loan

There are a few short-term loan variations to consider before applying for a loan: 

Personal Loans 

Personal loans can be both short or long-term loans depending on the term you choose, which usually ranges between 6 months to 5 years. Personal loans allow you to borrow a sum of money to cover a variety of expenses including emergency expenses. 

Your lender will charge you interest on the loan, and the principal and interest are paid over regular installments until the full amount owed is repaid. Interest rates range anywhere from 15% and 45%, on average, depending on your credit score.

Short-term personal loans can be great for emergencies as many online lenders offer funding within 24 to 48 hours after approval. 

Payday Loans

Payday loans typically have very short terms. These loans must be repaid in full, plus interest, in one lump sum by the time your next paycheque arrives. Repayment terms can be as short as a week or two and as long as 62 days.  

These short-term loans are available for smaller amounts, usually no more than $1,500. They’re very easy to qualify for, even if you have bad credit. You can also get access to the borrowed funds within a day, making it great for emergencies.

Payday loans are meant to be used as a last resort, as they’re extremely expensive. Interest rates can be as high as 500% or more, which is why they can be difficult to repay within such a short period of time.  

Cash Advance Loans

If you have a credit card, you can access funds against your credit if you haven’t yet reached your credit limit. This is the fastest way to get your hands on borrowed funds since there’s no need to apply for a loan. 

The credit is already available to you, as long as you have room on your card. All you need to do is use the card at an ATM and withdraw the cash. 

Interest rates on cash advances are often higher than the purchase rate with your card, and can be as high as 23.99%. Interest will start to accrue on the borrowed money as soon as you withdraw it.   

Can You Get A Secured Short-Term Loan?

The vast majority of short-term loans are going to be what’s known as “unsecured” debt, meaning the borrower hasn’t offered any collateral or doesn’t need any to be approved. However, depending on the lender, you may be able to offer collateral to secure the loan and increase your chances of getting a lower interest rate. 

What Can You Use As Collateral? 

Collateral refers to a borrower’s assets; pieces of property such as a home or a car, which can be offered up to secure a loan. If a borrower does have collateral, not only will their chances of approval increase, but the lender might give them a larger amount of money and maybe even a lower interest rate.

Risks Of Secured Short-Term Loans

It’s extremely important to understand the consequences of defaulting when collateral is involved. If the loan is secured by your assets and you default on your loan, your lender will have the right to seize your collateral to cover the remainder of your debt.

How To Get A Short-Term Loan In An Emergency?

To get a short-term loan quickly to cover an urgent expense, follow these steps:

1. Collect All Required Documents 

Lenders require certain types of documents to assess your financial strength and creditworthiness before deciding whether or not to approve your loan application. These may include an employment letter, pay stubs, tax receipts, and bank statements. You’ll also have to show a government-issued ID to help the lender verify your identity.

To speed up the application process, make sure you have all these required documents ready for submission.

2. Get Prequalified 

Prequalifying for a short-term loan will help you understand what types of loans you can qualify for without having to undergo a hard credit check. If you prequalify with multiple lenders, you can compare offers and choose the best option for you. 

Do note, prequalifying doesn’t mean loan approval is guaranteed, but it can help you do some comparison shopping without negatively impacting your credit score.

3. Apply

Once you’ve narrowed down your options, you can apply for your short-term loan. Depending on the lender, you may be able to apply online from wherever you are. This is the most convenient way to apply for a short-term loan and usually results in much faster approval decisions. 

If approved, you may receive your funds within a day or two, and often on the same day, depending on what time you applied.

What Will Short-Term Lenders Look For?

So, as we mentioned, every lender’s application and approval procedure will be different in some way. Nonetheless, some general factors that apply to most include: 

  • Credit Score – Higher credit scores indicate that the likelihood of you keeping up with your payments is high and that you’ll pay your loan back in full by the designated date.
  • Income Level – Most lenders have a minimum income requirement of $1,200 to $1,500.
  • Employment History – Not only will the lender check your income level but your employment stability. Generally, lenders like to see that you’ve been employed for at least 3 to 6 months. 
  • Debt Level – Your debt obligations can also affect your loan approval. High debt means you’ll have less income left over to handle a new loan. So you’ll want to ensure your current debt is low.  income, employment history, etc. 

Short-Term Loan FAQs

What interest rates do short-term loans have? 

Interest rates on short-term personal loans are significantly lower than that of a payday loan. While payday loans have an APR of 300% to 600%, short-term personal loans typically come with interest rates between 3% to 46%. The interest rate you’re charged on a short-term personal loan will vary according to your financial health, credit score and loan terms. 

Can I use a short-term loan for emergencies? 

Yes, short-term loans are versatile forms of credit that can be used for any purpose, including emergencies. Most short-term lenders offer small amounts, usually no more than $5,000, for short-term personal loans. Moreover, these short-term loans are usually paid back within a relatively short timeframe (6 months to 3 years). 

Should I get a payday loan? 

Payday loans are a frequent source for small short-term loans, usually for amounts of $100 to $1,500. They’re appealing because they require no credit check and many have same-day approval. All you need to get approved is a source of employment and an active bank account.  While payday loans are easy to access, they come with extremely high-interest rates, sometimes as much as 600% APR. That means a borrower could end up paying hundreds of dollars more for what was initially a very small amount of cash, especially if they don’t manage to pay it back by its original due date. All this is to say that if you need a small short-term loan, be extremely careful who you’re getting it from. 

What happens if I can’t repay my short-term loan?

Different lenders have different consequences when their clients default. If you miss a payment, depending on how much you owe in the first place, your lender might start by charging you a penalty fee and tacking on additional interest. If you continue missing payments, after a certain amount of time, your lender may turn your account over to a collections agency, who will pursue your debt in place of your lender. If the amount you owe is large enough, this can even result in a legal case, wherein a federal judge might order wage garnishment

Bottom Line

It’s clear that short-term loans can certainly be useful for emergency situations or for any other time when you need a bit of extra funding for something that you wouldn’t necessarily be able to afford otherwise. From an emergency situation to a good vacation, as long as you’re being responsible and making your payments on time, you can definitely use a short-term loan to get where you need to go. 

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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