Short-Term Loans: Types, Costs, and How to Pick the Right One

"Short-term loan" is an umbrella, not a product. Under it sit three genuinely different structures — the single-payment payday loan, the multi-payment installment loan, and the revolving line of credit — and picking the wrong one for your situation can double or triple what you pay. This page lays out how each works, what each costs, and a simple way to choose between them based on how much you need and how you can realistically repay.

One thing they share: all three are high-cost credit compared with banks and credit unions. If you have not yet ruled out cheaper routes — credit union payday alternative loans at capped 28% APR, earned wage access apps, assistance programs, or a simple payment plan with whoever you owe — spend five minutes on our alternatives page first.

The three structures, side by side

	Payday loan	Short-term installment	Line of credit
Typical amount	$100–$500 (up to $1,000 in some states)	$500–$5,000	limits from a few hundred to a few thousand
Term	2–4 weeks, one payment	~3–12 months, fixed payments	open-ended, minimum payments
Cost structure	flat fee per $100 borrowed	interest (APR) + sometimes origination fee	periodic rate on balance + draw or maintenance fees
Repayment	full amount on next payday	equal scheduled payments	flexible, balance revolves
Main risk	rollover cycle	long tail of high interest	perpetual balance

Payday loans: one paycheck, one payment

The classic short-term loan: borrow a few hundred dollars, repay principal plus a flat fee — typically $10–$30 per $100 depending on state law — in a single debit on your next payday. On $300 at $15 per $100, you repay $345 in two weeks; that 15% two-week charge annualizes to roughly 391% APR.

The structure's strength is its short leash: costs stop in two weeks if you repay. Its danger is the same leash: the entire amount is due at once, and borrowers who cannot clear it pay another fee to roll it over, then another. That cycle — not the first fee — is where the damage happens. Full product detail on our online payday loans page; a sober risk assessment in are payday loans safe.

Short-term installment loans: months, not weeks

Borrow a larger amount — commonly $500–$5,000 — and repay in fixed installments over roughly three to twelve months (sometimes longer). Each payment covers that period's interest plus a slice of principal, so the balance actually declines on schedule.

Pricing is quoted as APR and, in this credit tier, honesty requires a wide range: roughly 36% at the responsible end to 100–300%+ from high-cost online lenders, varying by state and lender. A worked example: $1,500 over 10 months at 150% APR runs a payment around $290/month and total interest near $1,400 — nearly the principal again. The same loan at 36% APR costs about $260 total interest. The spread between lenders is enormous, which is why comparing total repayment cost matters more here than in any other category. Our dedicated page on installment loans for bad credit works through the affordability math.

Short-term lines of credit: flexible, and quietly expensive

A line of credit gives you a limit — say $1,000 — that you draw against as needed, paying interest or fees only on what is outstanding. Some charge a periodic rate; many add draw fees (a charge per withdrawal) or monthly/statement fees that persist while the line is open.

Flexibility is real: for unpredictable, dribbling expenses (a month of car troubles, variable shifts), you avoid borrowing a lump sum you may not need. The trap is also real: minimum payments are designed to be small, balances revolve, and it is easy to pay high-rate interest for a year on money you meant to hold for a month. If you take a line, treat it like an installment loan: set your own payoff schedule and pay well above the minimum.

Choosing by amount and repayment reality

A practical decision rule, in two questions:

Question 1: How much do you actually need?

• $100–$500 — payday-style territory. Installment lenders often will not go this small, and stretching $300 over ten months of interest makes no sense. See amount-specific guidance at /borrow/300 and neighbors.
• $500–$1,000 — the overlap zone. Either structure works; the deciding factor is Question 2.
• $1,000+ — installment territory. Almost no state allows payday loans this large, and no single paycheck can absorb the repayment anyway.

Question 2: Can you repay the whole thing out of your next paycheck — honestly?

Do the arithmetic on paper: next paycheck, minus rent share, food, transport, utilities, minimums. If the loan's full repayment fits in what remains, a payday-style loan's flat fee is often the cheapest dollars-out-the-door option. If it does not fit — and be brutally honest, because optimism here is what fuels rollover cycles — an installment structure with payments sized to your budget is safer even though interest runs longer. A $460 payday repayment you cannot make becomes $60–$90 in rollover fees per month with the debt still whole; a $150/month installment payment retires the debt on schedule.

If neither fits, do not force it. That is the signal to work the cheaper-options list — assistance, payment plans, PALs — on /alternatives, or to read getting out of payday loan debt if you are consolidating an existing cycle.

State law decides what's on your menu

Everything above is filtered through your state's rules, and the variation is dramatic:

• Payday-permissive states allow single-payment loans with fee caps in the $10–$30 per $100 range and amount caps, often $500.
• Installment-oriented states have pushed lenders toward multi-month structures with rate caps that vary from modest to barely-there.
• 36%-cap and prohibition states — a substantial group — effectively exclude payday products entirely; only lower-cost installment lending or nothing operates there.

The same lender may offer a two-week loan in one state, a six-month installment product next door, and nothing at all across the river. Licensed lenders must follow your state's law, wherever they are based — an "offer" that ignores your state's caps is a red flag, not a workaround (see our tribal loans page for the common version of that problem). Check your state at /states and fee specifics at /rates-and-fees.

What all three have in common

• Verification, not blind approval. Lenders confirm identity, income, and bank account standing, and most check specialty credit bureaus even when they skip the big three — details in what lenders check. Bad credit is usually workable; no checks from a legitimate lender is a myth.
• Speed. Decisions in minutes; funding typically next business day, same-day sometimes possible before cutoffs — honest mechanics on our same-day funding page.
• Autopay collection. Repayment debits your checking account automatically. Calendar every due date and make sure the balance is there, because failed debits stack bank fees on top of loan fees.
• Scam-adjacency. High-urgency borrowers attract predators. Never pay an upfront fee to receive a loan, and vet unfamiliar lenders with the 60-second scam check.

The bottom line

Match the structure to the gap: flat-fee payday for a small amount you can genuinely clear in one paycheck, installment for anything larger or slower, and a line of credit only with your own disciplined payoff plan. Price the total repayment, not the payment size. And take the cheapest money available to you before any of these — that ordering is the whole game. If you have done that comparison and a short-term loan fits, you can start a request at /request and review actual offers, with no obligation, before deciding anything.