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What is a short term loan?
A short term loan is any type of loan that has a relatively short repayment period – usually anything less than a year. Due to their short nature, they tend to be for smaller amounts than long term loans. Quite a broad range of borrowing options can count as “short term”, including installment loans with short terms, lines of credit, credit cards, payday loans, cash loans, and more. Credit cards are the most popular form of short term borrowing in Canada, with the average Canadian owing $3,929 on their credit cards.
It should be noted that the rise in popularity of payday loans, which are very short term (they have a maximum repayment period of 62 days), has meant that the term “short term loans” is now often used synonymously with “payday loans” – but the latter is simply one type of the former.
Where’s the best place to get a short term loan?
Before you can start shopping for a short term loan, you need to know a few things:
- How much you need to borrow
- What you need the money for
- How quickly you need the money
- How you are able to repay a loan
- Your financial profile, including income level, existing debts and credit score
These data points will help you to find:
- The types of short term loans you qualify for
- The types of short term loans that meet your need
- The lenders that you are likely to gain approval from
As each individual person’s needs and situation will dictate the answer to the three key points shown above, there is no single “best” place to go for a short term loan. It’ll be different for everybody. So to make sure you’re going to the right lender for you, it’s key you thoroughly understand your own needs and situation, before you shop around and compare options. Remember that while having a low interest rate is important, it’s not all that matters: finding a lender with a good reputation and a solid history will save you a lot of trouble down the line.
How much can I borrow with a short term loan?
Short term loans tend to be for smaller amounts than long term loans, simply because repayments happen over a shorter period of time; trying to repay $100,000 over just a year would equal much higher monthly repayments (that most people can’t afford) than trying to repay $10,000 over the same period.
So while there is no cap on short term loans, most are for less than $35,000. Payday loans, just one type of short term loan, have a much lower cap of just $1,500.
How much does a short term loan cost?
The cost of a short term loan depends on two factors:
- The interest rate charged on the loan (whether fixed or variable), and
- The loan’s fees and other charges
With most types of personal loan, the majority of cost comes from interest, as it’s charged over a long period of time. However, depending on how short a short term loan is, fees can account for a higher proportion of the loan’s overall cost. So neither factor can be ignored.
Short term loan rates and fees vary from lender to lender, and between borrowers; the range can be anything from 0% to 35%+ in interest, and from $0 to several hundred dollars in fees.
Payday loans through a little complication into the mix, as their cost is not typically illustrated via separate fees and APRs; they are normally advertised with a single “fixed” cost that includes both fees and interest for a set repayment period. So when comparing the cost of your various options, bear this in mind, and remember to look at the overall cost of all forms of borrowing, over the whole repayment period, to judge which is cheaper.
What do I need to get a short term loan?
Getting a short term loan is relatively easy, as their smaller amounts and quick nature lend themselves to easier access. All you absolutely must have is:
- I.D. showing you are age of majority in your province
- Proof of address
- An active bank account
With these items in hand, you will have some borrowing options somewhere. However, it’s likely that with most lenders, you’ll need at least one other thing: proof of income. Most short term loans, including payday loans, rely on borrowers receiving regular money in, with which to repay their loan. This does not necessarily have to be employment income, but you’ll need to check with each lender’s eligibility requirements to see what they will accept. Credit can also be a factor, but again this depends on the lender you use.
Expert Review & Editorial Standards
This page was researched, written, and reviewed by financial professionals with expertise in Canadian lending regulations. All information is regularly updated to reflect current rates, terms, and regulatory changes.
Jenna West
Financial Writer & Content Director
Jenna has covered the Canadian FinTech and consumer lending industry since 2017. She specializes in regulatory updates, consumer protection, and helping Canadians navigate complex financial products.
- 8+ years analyzing Canadian consumer lending
- Monitors FCAC and provincial regulatory changes
- Specializes in personal loans and alternative lending
Amy Orr
Financial Content Specialist
Amy is a financial writer with 10+ years covering Canadian, U.S., and U.K. financial markets. She holds a Masters in Finance from the University of Edinburgh Business School and formerly worked in the hedge fund sector.
- Masters in Finance, University of Edinburgh
- Former hedge fund professional
- Published in major financial publications
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Every page undergoes research, expert writing, fact-checking, and review by our Financial Content Director. We verify all rates, terms, and regulatory information against official sources including FCAC guidelines and provincial lending regulations.
Last Updated: October 13, 2025 | Next Review: Ongoing monitoring
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