Among all the products and services offered by financial institutions, loans are perhaps the most daunting to avail. Unlike credit cards, which you apply for once and can use within their period of validity, loans are a one-off borrowing situation that requires you to account for a considerable repayment value. While there are plenty of loans available on the market, including personal, car, and home loans, short-term loans stand out for being fast, accessible, and the most viable option for immediate funding concerns. 

Whether you’re in a frenzy to make up the remainder of your bills before the deadline, in a financial dilemma due to a sudden costly emergency, or can barely get by until next payday with the last of your cash, the easy answer is to opt for a loan. But tiptoeing through the dizzying world of short-term loans, interest rates, and repayment periods is tough regardless if you’re a first-timer or a seasoned borrower. Here’s everything you need to know, from GoBear’s most calculative bears. 

Not-so simple terms 

Short-term loans seem like the answer to any money woe that falls into the lower scale of the value spectrum. For starters, most lending organizations will only let you borrow up to twice your monthly salary, which is lower than the amount you can receive from personal and asset loans. As a result, this service seems like the ultimate way to find your way through less substantial payment concerns. 


However, what lending institutions forget to tell you explicitly is that short-term loans come with sky-high interest rates, short repayment periods, and a myriad of additional fees. It’s crucial to familiarize yourself with the fine print, which contains all the pertinent details that may or may not influence your decision to take out a loan. Generally, long-term loans incur an interest rate of at least 1.3% over two years or more. In contrast, short-term loans may charge as much as 15-46% in total interest but consolidated in a repayment period of 6 months to a year. Ultimately, there isn’t a significant difference in the full repayment value if you’re looking into getting a small financial help. But you’ll have to create a strict budget in the coming months to make the repayment requirements on time. 




You can’t run away from additional fees, either. Most lending institutions charge processing or administrative fees, which cover the documents and human resources required to make your loan possible. Generally, costs range from P0-500, depending on how much you borrow. There isn’t a way to waive these fees, so you’ll have to add them to your total loan repayment value. 

 Differentiating between high and low-risk loans

The stakes are lower for short-term moneylenders as they’re essentially shelling out less money as opposed to personal loan services. However, there’s still a clear differentiation between high and low-risk loans, which is primarily dependent on your credit standing. For one, borrowers with low credit scores are considered as high-risk clients because they are, in theory, less likely to make repayments on time. Meanwhile, those with a good credit score and history are classified as low-risk clients. If you fall within this category, then you’re in luck. You’ll be able to snag lower interest rates compared to people labeled as high-risk. Depending on your financial institution of choice, the difference can be well over 10%. 


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But the risk doesn’t just exist for moneylenders. For borrowers, taking out a loan feels like threading through sharp pebbles. If you don’t choose the right lender, you may fall into a trap where you’ll end up paying more in additional charges than the actual loan. The easiest way to slip through these unfortunate situations is not to encounter them at all, and that begins with doing ample research. Choose trustworthy and accredited financial institutions that are transparent about their services and charges. GoBear has a consolidated list of some of the best short-term moneylenders on the market to help get you started. By scrutinizing your options, you can see the full picture before taking out a loan. 

Short-term loans aren’t all that bad 

After seeing interest rates of up to 40%, a lot of people shy away from the prospect of short-term loans. But the truth is that they aren’t all that bad. They’re the perfect solution for times when you need an immediate source of funds. For example -- if a loved one has been hospitalized in a medical institution that refuses to do in-patient procedures without a downpayment. Going short-term is also most likely your only loan option if you don’t have the credit score or collateral for other options. 

Ultimately, it’s an accessible financial lifesaver if you can commit to the repayments. However, if your monetary need isn’t immediate and you have the qualifications for other forms of loan, then consider a personal loan instead. The longer repayment period will allow your paychecks to breathe for a couple more years. 


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Never fall for local traps 

Some people may find the idea of visiting a bank or contacting a legitimate financial institution to be rather daunting, which may tempt them to take loans from a local loan shark. However, it’s detrimental to borrow money from anyone other than legitimate organizations as you may end up falling for a scam. Check out GoBear’s list of moneylenders or look for loan companies that are under the Securities and Exchange Commission. 

Here are some telltale signs that you’ve contacted a fraud: 

  • The lender isn’t concerned about your credit records. While most short-term lenders pay little attention to your credit score, the keyword is “little.” Even the smallest understanding of your credit history is necessary to evaluate whether or not you fit the bill. 
  • The lender asked for advanced fees. Legitimate institutions don’t ask for an upfront fee as the lender pays for everything for through repayments, with the occasional exception of administrative fees. But those won’t cost you more than P250 in most cases. 
  • The lender has no physical office. There are plenty of financial institutions that offer online services, but legitimate ones will always have a physical office that acts as the base of their operations. Be wary of any service that can’t provide an address. 
  • The lender was in a rush. Lenders are never in a hurry for you to complete the loan application process as they understand that it takes a significant amount of consideration on your part. They’ll patiently explain the terms and answer your questions in full detail, without eliminating the cons of the situation. If the lender you’re talking to seems to be in a rush, then they are most likely a scam. 

On that note, don’t accept 5-6 loans and Sangla-ATMs that use threats to get you to fulfill repayments. At the end of the day, you can get a much better deal at a real financial institution, so it’s best to put on a brave face and make that application happen. 




The Bottom Line: Thread With Care 

Getting a short-term loan isn’t as complicated as it sounds. With the availability of online services, you can get a stamp of approval in under a day, so there’s no reason for you to be afraid of communicating with a financial institution. However, you must understand the responsibility of making repayments on time to avoid accumulating a massive debt due to stacked interest rates. 

While the percentage rate may seem high at first glance, it doesn’t sum to much, as short-term loans have a lower upper loanable limit compared to personal loans and asset loans. Regardless, you shouldn’t borrow what you can’t afford to pay off in a year. If you keep these tips in mind, then you’re unlikely to run into an unfavorable financial situation in the future. 


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Nicole Si

Nicole Si

Nicole is a 20-something writer whose words are fueled by iced coffee and a penchant for financial intricacies. Before GoBear, she was a Communications graduate and a business analyst who's had her fair share of money challenges.