The 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 usually paid in equal monthly installments over a long period of time. 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 become a costly step if the lender demands a prepayment penalty.

What to do if you want a short-term loan?

Many consumers choose personal loans over other forms of financing because they offer more competitive interest rates and repayment terms ranging from one to seven years. The longer the loan term, the cheaper the monthly payment, making it easier to stay on track and protect your creditworthiness.

However, the short-term cost savings also mean you’ll be spending more on interest over time. To put this in perspective, if you get a $5,000 3-year loan with an interest rate of 9 percent, you’ll pay $159 monthly and $5,723.95 over the life of the loan. However, if you accept a 2-year term, your monthly payment increases to $228, but you only pay $5,482.17 for the life of the loan.

If you prefer to save interest, you can opt for a personal loan with a shorter term. Or you can take out a longer-term loan to get a lower monthly rate that doesn’t strain your budget too much and pay off early. However, it is important that you choose a lender that allows you to pay off the loan before the term expires without incurring a penalty.

Online personal lenders with no prepayment penalty

If you’re looking for a short-term loan, it’s best to only consider lenders that don’t penalize borrowers who wish to repay before the loan term expires. Otherwise, you will have to pay fees to close the loan in your preferred time frame. Fortunately, several lenders do not charge fees for prepaying your loan.

lender loan amount conditions APR range
lucky money $5,000 – $40,000 2 to 5 years 5.99% – 24.99%
Luminous flux $5,000 – $100,000 2 to 7 years 3.99% – 19.99% (with AutoPay)
SoFi $5,000 – $100,000 2 to 7 years 6.99% – 22.23% (with AutoPay)
upstart $1,000 – $50,000 3 to 5 years 5.40% – 35.99%

lucky money

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

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

There are no prepayment penalties or late payment fees, but a processing fee of up to 5 percent may apply.

Luminous flux

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

If you can find a comparable loan product with a better interest rate elsewhere, LightStream will offer you a 0.1 percentage point lower interest 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 term.

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 might be eligible for a personal loan with SoFi, even with minimal credit history. Another significant benefit of doing business with the online lender is free access 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 pay no application, origination, late payment, or prepayment fees. SoFi also allows for joint applications if you cannot qualify for a personal loan on your own.


Upstart is worth considering as it also offers competitive interest rates and fast financing options. Also, the lender looks beyond your credit history and examines your education and work history to determine if you qualify for a personal loan.

In the event of a funding commitment, you will not pay any prepayment penalty if you repay the loan early. Still, Upstart charges a processing fee of up to 8 percent, as well as fees for late payments and refunds. You also pay a fee if you choose to receive paper statements in the mail.

Alternatives to a personal loan for a short-term loan

A shorter-term personal loan isn’t the only way to get the funds you need. Here are a few alternatives:

  • Credit card: If you have a credit card with an available balance, you can use it to meet your short-term financial needs. Make sure you pay back your expenses 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 cash it out before the end of the promotional period.
  • Auto Letter Loan: A car title loan allows you to borrow up to 50 percent of your car’s market value (if you own it outright). Perfect credit isn’t required, but here’s the catch: you have to pay high interest rates and your car is being used as collateral. So this loan product can break your budget too much and you could lose your vehicle if you default on the payments.
  • payday loan: These credit products are aimed at consumers with bad credit and should only be used as a last resort as they come with hefty APRs, sometimes as high as 600 percent. When you apply, the lender will request your payslip and bank details to ensure you are employed and know where to withdraw the money when it comes time to collect. Most loans do not exceed $500 and are due on your next payday.

bottom line

A personal loan can help you get through a short-term financial emergency or cover an important expense. When researching your options, confirm that the lender does not charge any prepayment penalties. Even if you get a longer repayment term with a higher interest rate, your payment will be cheaper and you have the option to pay off the balance in full early to save on interest.

However, if a personal loan is not a good fit, other options are available. Be sure to consider the pros and cons of each to make an informed and intelligent financial decision.

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