Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Oct 22, 2012

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Short-term loans (or payday loans) do not require a credit check. Short-term loans, by their nature, are unsecured and among the easiest for borrowers to attain. Many lenders will provide money in less than 24 hours. The monetary lending range typically falls between $50 and $1,000.

Due to the lack of a credit check, payday loans are one of the few loans that people with poor credit can apply for. All that most lenders require is an adequate proof of income and a checking account. Since lenders are not aware of the borrower’s credit score, they must ensure that the inherent risk of lending their money will be worthwhile, and this comes in the form of a higher interest rate.

Loans with longer terms typically offer lower interest rates and more manageable payment options due to added security of the loan. This is a more valuable and cost-effective manner to loan money. The downside of long-term loans is they are more difficult to approve. Lenders perform credit checks on long-term borrowers to decrease payment risks.

Although short-term loans carry higher interest rates, they do provide a valuable source of income for many individuals. The uses for a short-term loan vary from automobile repairs to food and utilities.

A major critique of short-term loans is how to pay the debt back. When a person applies for a short-term loan, they do not have sufficient funds to pay for the unexpected or expected expense. The loans must be repaid in less than a month, with most lenders expecting repayment after only two weeks. Given this short time frame, many people find it difficult to pay back the money. Unless a borrower received more money than normal, they will likely have an issue with funds once again. This leads to “rollovers” which are payment extensions with an added fee.

If a short-term loan seems too risky, additional loan options include family loans, wage advances and personal loans. These options typically offer borrowers their needed money with a lower interest rate than short-term loans.