Best short-term loans with no prepayment penalty
Key takeaways
- Short-term personal loans typically have repayment terms of three years or less.
- Choosing a short-term loan over a loan with a longer term may save you thousands of dollars in interest.
- If you plan to pay off a personal loan ahead of schedule, make sure the lender doesn't charge prepayment penalties.
Many traditional short-term loans, like payday loans and title loans, offer cash quickly in exchange for extremely high interest rates and fees. As an alternative, some people turn toward a personal loan.
Personal loans are payable in equal monthly installments over a period of two to five years. You may also have the option to pay the loan off early to save on interest.
To avoid a prepayment penalty, compare lenders that don’t charge it. There are multiple options to choose from, so find a lender that offers competitive rates, limited other fees and loan terms that fit your budget.
Best short-term personal loans with no prepayment penalty
You can find both banks and online lenders that offer personal loans with no prepayment penalty. This is a small selection, so be sure to compare multiple lenders and check for other fees when determining the best fit for your needs.
| Lender | Loan amount | Terms | APR range |
|---|---|---|---|
| Happy Money | $5,000–$40,000 | 24–60 months | 8.95%-17.48% |
| LightStream | $5,000–$100,000 | 24–84 months | 6.94%-25.29% with AutoPay |
| SoFi | $5,000–$100,000 | 24–84 months | 8.99%-29.49% with AutoPay |
| Upstart | $1,000–$50,000 | 36 or 60 months | 7.40%-35.99% |
Happy Money
Bankrate's view
Happy Money puts customers first with its innovative approach to lending. Its personal loans are ideal for consumers looking to consolidate high-interest debts to save money, and borrowers also get exclusive access to tools that can help manage your finances more effectively.
While its funding times are a bit slower than what you’ll find with other online lenders, its minimum credit score requirement is on the lower end. And Happy Money’s maximum APR is only 17.99 percent — most lenders set their maximum rates well above 20 percent.
Pros
- Low maximum APR
- Partners with credit unions
- No late fees
Cons
- Only offers credit card debt consolidation
- Not available in Iowa, Massachusetts or Nevada
- Origination fee up to 5.5%
LightStream
Bankrate's view
LightStream offers some of the lowest interest rates on personal loans. Although you’ll need a good or excellent credit score and lengthy credit history to qualify, you could be eligible for a flexible loan that doesn’t come with spending restrictions or fees.
If you can find a comparable loan product elsewhere with a better rate, LightStream will offer you a rate that’s 0.1 percentage points lower. Keep in mind that shorter loan terms typically come with lower interest rates, which means it’s in your best financial interest to opt for a shorter repayment period.
Pros
- Same-day funding available
- No fees
- Rate Beat program
Cons
- No option to prequalify
- Good to excellent credit required
- Long credit history required
SoFi
Bankrate's view
SoFi features a seamless application experience with minimal fees. You can opt for an origination fee in exchange for a lower APR, and there are no prepayment penalties. This allows you to tailor your payments to your needs. SoFi also allows joint applications if you’re unable to qualify for a personal loan on your own, but like many personal loan lenders, it does not allow cosigners.
When doing business with SoFi, you’ll get free access to financial advisors, career resources and other virtual experiences and events designed to help you level up your finances.
Pros
- Prequalification available
- 0.50% autopay discount
- Same-day funding available
Cons
- High maximum APR
- No cosigner option
- Optional origination fee
Upstart
Bankrate's view
Upstart is worth considering if your credit is on the lower end. It doesn’t have a minimum credit requirement, and it offers a competitive starting APR. In addition, Upstart looks beyond your credit score and examines your education and work history to determine if you’re a good fit for a personal loan.
If approved for funding, you won’t pay a prepayment penalty if you pay the loan off early. Still, Upstart charges an origination fee of up to 12 percent, along with late payment and returned payment fees. You’ll also pay a fee if you choose to receive paper statements in the mail.
Pros
- Competitive minimum APR
- Low starting amount of $1,000
- Fast funding
Cons
- Origination fees up to 12%
- Only two loan terms available
- High maximum APR
How to compare short-term personal loans
When shopping for short-term personal loans, it’s important to look at the terms associated with each lender to understand what the overall cost will be. This cost will largely be determined by your annual percentage rate (APR) and loan term. Generally speaking, the shorter your repayment term, the more money you save over the life of the loan.
To illustrate, if you get a $5,000 loan with a three-year term and a 9 percent interest rate, you’ll pay $159 monthly and $723.95 in interest. If you pay off the same loan over two years instead, your monthly payment will be $228 — but you’ll only pay $482.17 in interest. You can use a personal loan calculator to estimate your overall borrowing costs.
You should make sure a loan not only works comfortably within your monthly budget, but that it also offers terms that make sense for your financial situation and needs. This should include finding a loan that does not charge exorbitant late fees or prepayment penalties. Some of the specific items to compare side-by-side include:
- Origination fees
- Interest rates
- Prepayment penalties
- Repayment timeline
- Monthly payment amount
Alternatives to a short-term personal loan
A short-term personal loan isn’t the only option to get the funds you need. Credit cards don’t charge prepayment penalties and may be a safer option, but if you are unable to qualify, bad credit loans, payday loans and title loans also have short terms.
- Credit cards: If you have a credit card with available credit, you can use it to meet your short-term financial needs. Be sure to repay what you spend before the due date to avoid accruing interest. There are also cards that offer 0 percent APR on purchases for a limited period, but these can be difficult to qualify for.
- Bad credit personal loans: While you won’t get access to the best interest rates, many bad credit lenders do not charge prepayment penalties. These may also have short terms of 24 to 36 months, but if you need longer to repay, some offer terms up to 72 months.
- Payday loans: Payday loans cater to consumers with poor credit and should only be used as a last resort. However, payday loans frequently have high APRs, sometimes 400 percent or more. Most loans do not exceed $500 and are due on your next payday.
- Car title loans: Title loans allow you to borrow up to 50 percent of your car’s market value — if you own it outright. However, expect to pay a hefty interest rate and use your car as collateral. And because your car is collateral, you could lose it if you fall behind on payments.
Bottom line
A personal loan can help you get over a short-term financial hardship or cover an unexpected expense. When researching your options, confirm that the lender does not charge prepayment penalties and compare interest rates. Even if you get a lengthy repayment period with a higher interest rate, your payment will be more affordable — and you’ll have the ability to pay the balance in full early to save on interest.
If a personal loan isn’t a good fit, there are personal loan alternatives available. Be sure to consider the benefits and drawbacks of each to make an informed decision.
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