Should you get a short term loan with Square’s Cash app?
Square App Cash—A peer-to-peer payment service — is currently testing short-term loans with selected users. As TechCrunch reports, Cash App offers small loans with a repayment term of four weeks. Although the new feature is only available to 1,000 Cash App users, the company may offer a wider rollout in the future.
Here’s how it works: Cash App users can apply for a small loan of $ 20 to $ 200 in the app. TechRadar says approval is instantaneous and users have four weeks to repay the loan. Cash App currently offers a flat fee of 5%, which equates to an APR of 60% when calculated annually.
For example, if you borrowed $ 200, you’ll have to pay a flat fee of $ 10, assuming you pay off the balance on time. If you miss the repayment deadline, however, Cash App adds 1.25% interest (not compounded) each week. Once your default is made, you will no longer be able to claim another Cash App loan.
Alternatives to the Cash application
Payday loans are an expensive alternative. These loans, usually up to $ 500, are usually due on or before your next payday. With fees ranging from $ 10 to $ 35 for every $ 100 you borrow, a two week payday loan can have an APR of almost 400%.
There are other online lenders like Opportune or OppLoans, for example, which can offer quick access to small emergency loans. Opportune recently announced an “all-in” APR cap of 36%, while you may incur a Three-digit APR with OppLoans.
A less common option—alternative payday loans-may be available through federal credit unions. As NerdWallet reportsThese loans can be up to $ 2,000 with repayment terms of one to twelve months. The maximum APR is 28% and the application fee is $ 20, making it a lot cheaper than a payday loan.
The bottom line
Tthere aren’t many details about the Cash App Short Term Loan just yet – it may be a cheaper alternative to payday loans, but can be more expensive than some online lenders or alternative payday loans. Applying through the app is a convenient option, especially if you are already a Cash app user, but you should check the fine print before applying.