Best short term personal loans with no prepayment penalty


Many traditional short-term loans offer quick cash in exchange for extremely high interest rates and fees. As an alternative, some people turn to a personal loan.

Personal loans are generally repayable in equal monthly installments over a long period. You also have the option of prepaying the loan to free up income in your spending plan and potentially save on interest. However, it could be a costly decision if the lender charges a prepayment penalty.

What to do when you want a short term loan

Many consumers are turning to personal loans over other forms of financing because they come with more competitive interest rates and loan terms of between one and seven years. The longer the loan term, the more affordable the monthly payment, keeping you on track and preserving your credit rating.

However, the short-term cost savings also mean you’ll spend more on interest over time. For example, if you get a $5,000 loan for 3 years with an interest rate of 9%, you will pay $159 per month and $5,723.95 over the life of the loan. But if you accept a 2-year term, your monthly payment will increase to $228, but you will only pay $5,482.17 for the term of the loan.

If you prefer to save on interest, you can opt for a shorter term personal loan. Or you can take out a longer-term loan to get a lower monthly payment that doesn’t drain your budget too much and pay it off sooner. However, it is essential that you choose a lender who allows you to repay the loan before the expiry of the term without incurring any penalty.

Online personal lenders with no prepayment penalties

If you’re looking for a short-term loan, it’s best to only consider lenders who don’t penalize borrowers for wanting to repay before the end of the loan term. Otherwise, you will have to pay a fee to close the loan within the time frame you prefer. Fortunately, many lenders do not charge a fee for prepaying your loan.

Lender Amount of the loan Terms APR range
happy money $5,000 – $40,000 2 to 5 years 5.99% – 24.99%
LightStream $5,000 – $100,000 2 to 7 years old 3.99% – 19.99% (with automatic payment)
SoFi $5,000 – $100,000 2 to 7 years old 6.99% – 22.23% (with automatic payment)
Reached $1,000 – $50,000 3 to 5 years 5.40% – 35.99%

happy money

Happy Money puts customers first with its innovative approach to lending. Its personal loans are ideal for consumers looking to consolidate high-interest debt to save money, and borrowers also get exclusive access to a variety of tools to help them manage their finances more efficiently.

While their funding times are a bit slower than you’ll find with other online lenders, the minimum credit score requirement is lower. And if you have impeccable credit, you could qualify for a loan with an attractive interest rate.

There are no prepayment penalties or late payment fees, but an origination fee of up to 5% may apply.


LightStream offers some of the lowest interest rates on personal loans. Although you need a good or excellent credit score and a long credit history to qualify, you may qualify for a flexible loan that doesn’t come with spending restrictions.

If you can find a comparable loan product elsewhere with a better rate, LightStream will offer you a 0.1 percentage point lower rate. Also, keep in mind that shorter loan terms usually come with lower interest rates, which means it’s in your best financial interest to opt for a shorter repayment period.

Same day financing is available and there are no prepayment penalties or other fees.


If you have a credit score of at least 680, you may qualify for a personal loan with SoFi even with minimal credit history. Another important benefit of doing business with the online lender is the free access you will receive to financial advisors, career coaches, and other virtual experiences and events designed to help you improve your finances.

This online lender offers a seamless application experience, and you won’t pay any application, set-up, late payment, or prepayment fees. SoFi also allows joint applications if you are unable to qualify for a personal loan on your own.


Upstart is worth considering as it also offers competitive interest rates and quick financing options. Additionally, the lender looks beyond your credit score and examines your education and work history to determine if you are a good candidate for a personal loan.

If financing is approved, you will not pay a prepayment penalty if you repay the loan early. Yet, Upstart charges setup fees of up to 8%, as well as late payment and return payment fees. You will also pay a fee if you choose to receive paper statements by mail.

Personal loan alternatives for a short term loan

A short-term personal loan isn’t the only option to get the funds you need. Here are some alternatives:

  • Credit card: 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 on those purchases. Or you can apply for a credit card that offers zero percent APR on purchases for a limited time and pay it off before the promotional period ends.
  • Car title loan: You can borrow up to 50% of the market value of your car (if you own it) with a car title loan. Perfect credit isn’t necessary, but here’s the catch: you can expect to pay high interest and your car is used as collateral. So this loan product can stretch your budget too much and you could lose your vehicle if you fall behind on your payments.
  • Payday loan: These loan products are aimed at consumers with poor credit and should only be used as a last resort as they come with a high APRS, sometimes as high as 600%. When you apply, the lender will ask for your pay stub and banking information to ensure that you are employed and know where to withdraw the funds from at the time of collection. Most loans are no more than $500 and are due the day of your next payday.

At the end of the line

A personal loan can help you overcome a short-term financial difficulty or cover a major expense. When researching your options, confirm that the lender does not charge prepayment penalties. Even if you get a long repayment period with a higher interest rate, your payment will be more affordable and you’ll have the option to pay off the balance in full sooner to save on interest.

If a personal loan isn’t right for you, other options are available. Be sure to consider the pros and cons of each to make an informed and smart financial decision.


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