Can You Borrow Money From Cash App? Understanding Cash App Loans

Cash App has evolved beyond a simple peer-to-peer payment platform, now offering a variety of financial services, including the ability to borrow money. This feature, often referred to as “Cash App Borrow,” provides users with short-term loans directly within the app. But how exactly does borrowing money from Cash App work? What are the terms and conditions? And is it the right option for your financial needs?

This article delves into the specifics of Cash App loans, drawing insights from the official Cash App Loan Agreement to provide you with a comprehensive understanding. We’ll explore the key aspects of borrowing money from Cash App, helping you make informed decisions about using this feature.

Understanding the Basics of Cash App Borrow

Cash App Borrow functions as a closed-end loan service provided through a partnership between Cash App and First Electronic Bank, Member FDIC. When you borrow money from Cash App, you are essentially entering into a loan agreement with First Electronic Bank. Square Capital, a subsidiary of Square Inc. (now Block Inc.), also plays a role in managing and servicing these loans.

Key Definitions to Know:

To understand the Cash App Loan Agreement, it’s crucial to familiarize yourself with some key terms:

Annual Percentage Rate (APR): This is the yearly cost of your loan, including fees and interest, expressed as a percentage. The specific APR for your loan is outlined in the “Summary of Loan Terms” you receive before accepting the loan.
Borrowed Amount: Also known as “Amount Financed,” this is the principal amount of money you are borrowing.
Finance Charge: This is the total dollar amount you will pay for the loan, in addition to the Borrowed Amount. It’s essentially the cost of borrowing the money.
Due Date: The date by which your full repayment (Borrowed Amount and Finance Charge) is due. This is detailed in your “Summary of Loan Terms” as the “Final Due Date.”
Execution Date: The date you officially take out the loan, as recorded in your Cash App activity feed.
Overdue Interest: Charges applied if you fail to repay the loan by the Due Date. This accrues weekly on the unpaid Borrowed Amount after the due date.
Payoff Amount: The total amount you need to pay to fully settle the loan, including the Outstanding Balance and any Overdue Interest.
Outstanding Balance: The remaining amount you owe, calculated as the Borrowed Amount plus Finance Charge, minus any payments you’ve already made.

Credit Checks and Reporting

When you apply for a Cash App loan, Cash App, along with First Electronic Bank and Square Capital, is authorized to obtain your credit reports from credit reporting agencies. This is done for several reasons:

Identity Verification: To confirm your identity and prevent fraud.
Loan Decisions: To assess your creditworthiness and determine loan eligibility and terms.
Loan Servicing: To manage your loan account.
Marketing Purposes: To send you information about future products and services (you can opt out of marketing communications).
Internal Analytics: For credit modeling and improving their services.

It’s important to note that initially checking your eligibility for a Cash App loan may not impact your credit score. However, submitting a loan application or accepting a loan can result in a credit inquiry, which may slightly affect your credit score.

Furthermore, Cash App and associated entities may report information about your loan account to credit bureaus. This includes your payment history. Late payments, missed payments, or defaults can negatively impact your credit report. If you believe there are inaccuracies in your credit report related to your Cash App loan, you should contact Block Inc. (formerly Square Inc.) at the address provided in the Loan Agreement to dispute the information.

Promise to Pay and Loan Disbursement

By entering into the Loan Agreement, you formally agree to repay the Bank the Borrowed Amount, along with the Finance Charge and any Overdue Interest that may accrue if you miss the Due Date.

The loan disbursement process is straightforward: First Electronic Bank will deduct the Finance Charge from the total loan amount and then deposit the Borrowed Amount into your Cash App account. This means you receive the principal amount after the fees have been accounted for.

Loan Purpose and Structure: Personal, Short-Term Use

Cash App loans are intended for personal, family, or household purposes only. You are explicitly prohibited from using loan proceeds for postsecondary educational expenses.

The loan structure is designed for short-term borrowing:

Borrowing Limits: There is a limit to how much you can borrow, which is determined by Cash App’s internal criteria.
Revolving Line of Credit (Not): Each Cash App loan is a one-time, closed-end loan. This means it’s not a revolving line of credit like a credit card. You borrow a specific amount, repay it, and if you need to borrow again, it’s a new loan application subject to credit evaluation and eligibility.
Subsequent Loans: You may be eligible to take out subsequent loans up to your borrowing limit, but each loan is a separate agreement and requires approval.

Finance and Interest Charges Explained

The Finance Charge for a Cash App loan is calculated as a percentage of your Borrowed Amount. It’s not an interest rate applied over time to the outstanding balance like with some other loan types. Instead, it’s a fixed fee determined at the outset of the loan.

Interest Charges (Overdue Interest) only apply if you fail to pay your loan by the Due Date. If you miss the deadline, Overdue Interest will start accruing on the unpaid Borrowed Amount on a weekly basis. This continues until the Payoff Amount is paid in full. This highlights the importance of repaying your Cash App loan on time to avoid additional costs.

Scheduled Payment and Repayment Options

Cash App loans are designed for a single, lump-sum repayment. Your payment schedule will be one lump sum payment due on the Due Date, as specified in your “Summary of Loan Terms.”

While you are expected to make a single payment on the Due Date, Cash App offers some flexibility:

Prepayment: You can prepay your loan in full or in part at any time before the Due Date without any prepayment penalties.
Non-Refundable Finance Charge: Even if you prepay, the Finance Charge is non-refundable. It is considered fully earned by the bank once the Borrowed Amount is disbursed.

Repayment Methods:

Cash App provides several options for making your loan payments:

Automatic Payment: You can enroll in automatic payments during the loan application process. This can be set up for the lump sum payment on the Due Date. You’ll receive a separate “Automatic Payment Agreement” if you choose this option. You can opt-out of automatic payments through Cash App support.
Manual Electronic Payments: You can manually make payments electronically using a debit card linked to your Cash App account.
Payment by Mail (Check): While less convenient, you can send physical checks payable to “Cash Lending” to a specified lockbox address. Your check must include your Cashtag, original Borrowed Amount, and original borrow date. Mailed checks must be received by 4:00 PM CT on a Business Day to be credited on the same day. Cash App encourages electronic payments and may reject other forms of payment, including cash.

Defaulting on Your Cash App Loan: What to Expect

Defaulting on your Cash App loan can have significant consequences. According to the Loan Agreement, you will be in default if any of the following occur:

Failure to Pay: You don’t make your payment in full by the Due Date.
Payment Rejection: A payment you make is rejected by your bank.
Bankruptcy/Insolvency: You file for bankruptcy or become subject to insolvency proceedings.
Inability to Repay: You are unable to repay your obligations (including in cases of death or legal incapacity).
False Information: You provide inaccurate, untrue, or incomplete information during the application process.
Breach of Agreement: You fail to comply with any term of the Loan Agreement.
Relocation Outside the US: You permanently reside outside the United States.

Consequences of Default:

If you default, Cash App and First Electronic Bank can take several actions, which may include:

Debit from Linked Accounts: If you are enrolled in automatic payments, your Cash App balance or linked debit card may be debited for the overdue amount.
Debit from Cash App Balance (Even Negative Balance): If your loan remains in default for over 90 days, Cash App may debit the Payoff Amount directly from your Cash App balance. This could result in a negative Cash App balance. Any funds you subsequently receive in your Cash App (peer-to-peer payments, direct deposits, etc.) will first be used to offset this negative balance. You may also be unable to use your Cash Card while you have a negative balance.
Suspension of Cash App Features: Your ability to use certain or all Cash App features may be suspended until you resolve your outstanding loan obligation.
Continued Overdue Interest: Overdue Interest will continue to accrue on your Outstanding Balance as long as it remains unpaid.
Other Actions: Cash App and the bank may take any other actions permitted by law to recover the debt.

It’s crucial to understand that Cash App loans may not be available in all states. If you move to a state where Cash App loans are not offered, you will not be able to take out subsequent loans.

Important Information and Legal Agreements

The Cash App Loan Agreement and related documents constitute the entire agreement between you and First Electronic Bank. These documents include:

E-SIGN Act Consent: Your agreement to electronic signatures and communication.
Loan Agreement: This document outlining the terms and conditions.
Summary of Loan Terms / Truth in Lending Disclosure: Details specific loan terms like APR, Finance Charge, and Due Date.
Credit Report Authorizations: Your consent for credit checks.
Automated Payment Authorization (if applicable): Your agreement to automatic payments.
Privacy Policies: Information about data handling and privacy.
Updated Terms: Any future modifications to the agreement.

Governing Law and Dispute Resolution:

The Loan Agreement is governed by Utah law and applicable federal law, including the Federal Arbitration Act.

Arbitration Clause: The agreement includes a binding individual arbitration clause, meaning that most disputes will be resolved through arbitration rather than court litigation. You waive your right to a jury trial and to participate in class actions. This arbitration provision does not apply to “Military Borrowers.”

Before initiating arbitration, you are required to send a Notice of Dispute to First Electronic Bank at the address specified in the agreement and attempt to resolve the issue informally for 60 days.

Military Annual Percentage Rate (MAPR)

Federal law provides specific protections for Military Borrowers (members of the Armed Forces and their dependents) regarding consumer credit. The Military Annual Percentage Rate (MAPR) limits the cost of credit to a maximum of 36% per year. This rate includes not only interest but also:

Credit insurance premiums
Fees for ancillary products sold with the loan
Application fees (excluding certain fees for specific credit transactions)
Participation fees (excluding certain fees for credit card accounts)

Cash App provides a toll-free number (855) 949-7782 for Military Borrowers to hear disclosures and information about their payment obligations.

State-Specific Notices

The Loan Agreement includes various state-specific notices as required by law. These notices cover aspects such as:

Rights of married applicants (California)
Consumer rights to read and copy the agreement (Iowa, Kansas)
Non-discrimination laws (Massachusetts, Ohio)
Enforceability of written agreements (Iowa, Missouri, Washington, Utah)
Credit reporting notifications (California, Utah, New York, Rhode Island, Vermont)
Marital property rights (Wisconsin)

These state notices are legally required disclosures and provide additional information relevant to residents of those specific states.

Conclusion: Is Borrowing from Cash App Right for You?

Cash App Borrow offers a convenient way to access small, short-term loans directly through your mobile app. It can be a helpful option for covering unexpected expenses or bridging financial gaps. However, it’s crucial to understand the terms and conditions, including the Finance Charge, APR, Overdue Interest, and repayment schedule.

Before borrowing money from Cash App, consider the following:

Cost of Borrowing: Carefully review the “Summary of Loan Terms” to understand the total cost of the loan, including the Finance Charge and APR. Compare this to other borrowing options.
Repayment Ability: Ensure you have a clear plan to repay the loan in full by the Due Date to avoid Overdue Interest and potential negative impacts on your credit.
Alternatives: Explore other options like personal loans, credit cards, or borrowing from friends or family to see if you can find more favorable terms.
Impact on Credit: Be mindful that taking out and repaying (or defaulting on) a Cash App loan can affect your credit report.

Cash App Borrow can be a useful tool when used responsibly and with a clear understanding of its terms. By being informed about how it works, you can make sound financial decisions and leverage Cash App’s borrowing feature to your advantage when needed.