Phones play a big role in even our offline lives, and that includes managing money: you can easily and securely charge your friend for an iced latte, check up on your bank account, or craft a budget. Now, add borrowing money to the list.
Cash App, a mobile platform that lets users send and receive money from others, has a Borrow feature that allows some users to take out loans. Each loan initially ranges from about $20 to $400 and carries a flat five percent fee, plus a 1.25 percent weekly interest rate. After a short onboarding process and repayment plan agreement, the money is instantly available.
So if you're short on funds, is it wise to make up the deficit with a loan from Cash App, and are there potential risks involved? POPSUGAR talked with finance expert Travis Sholin, PhD, CFP, the CEO of Keystone Financial and an adjunct professor of finance at the University of Nebraska at Omaha, to learn what potential users should know about borrowing money through Cash App Borrow.
What Is Cash App?
First off, Cash App is a mobile platform that facilitates the transfer of funds between users, either from a linked bank account or a stored balance within the app. The Borrow feature launched in 2020 and has about two million active monthly users as of September 2023. Dr. Sholin compares it to a "cash advance where you can get a little short-term money if you need it."
How to Know If You're Eligible to Use Cash App Borrow
According to a Cash App spokesperson, only certain prescreened users are eligible to use Cash App Borrow. Borrow is invite-only, and eligibility is determined by factors like where you live (the feature is available in 36 states only) and your activity within the app itself. It's not connected to your credit score.
To find out if you're eligible to use Borrow, click the Money button on the bottom left of the app's home screen. Borrow will appear there if you can access it. If you don't see Borrow within your app, you can't take out loans now, but you may be able to in the future. Consistently depositing and keeping your Cash App balance above $0 helps your approval odds, as does opening a Cash Card, a Visa debit card that's connected to your Cash App balance, and using it often.
How to Borrow Money From Cash App
Taking out a loan is relatively easy within Cash App. After hitting the Borrow button, you'll be presented with some options for loans you could take out (users can't request Borrow loans themselves). You can reject or accept these options.
If you choose to accept one, you'll next enter some personal information that Dr. Sholin says is standard for any loan, like your social security number, birthday, address, and details about your income and employment. Next you'll read and sign a user agreement that outlines the terms and conditions of the loan and the repayment process. Some of the terms involve agreeing to a credit check and acknowledging that Cash App can report information about your account to credit bureaus.
Per the terms of the agreement, you'll make four weekly payments using your stored Cash App balance or withdrawing from a linked bank account until the full loan is taken care of. If you don't pay on time, you'll accrue weekly interest. If you fail to meet the conditions of the repayment plan, your loan could default and Cash App could withdraw the overdue amount from your bank account or app balance.
According to the spokesperson, there's no limit to how many individual loans you can take out at once, as long as you stay under your personal borrowing limit and don't have any overdue loans. Your limit can increase with on-time payments and is affected by your loan repayment history.
The Benefits of Borrowing Money From Cash App
According to Dr. Sholin, one Cash App Borrow benefit is its relatively streamlined and accessible process. Requesting a personal loan from a bank involves a deep dive into your finances and could take a month to be approved; plus, most banks won't issue small loans like the ones Cash App initially offers.
Facilitating payment through a secure platform like Cash App is a positive, too. "If it's between this and going to get a paycheck advance from a predatory place, this is a better option," he says. He adds that the flat five percent fee is low for a personal loan. The options to pay back your loan early in full or preschedule auto payments are helpful ways to minimize the chances of being late, too.
It's unclear whether Borrow is an effective means to build credit long-term, but Dr. Sholin says making on-time or early payments toward any debt will generally benefit your credit score. "This could be a way for someone to make small transactions to show they can be responsible," he says.
The Drawbacks of Borrowing Money From Cash App
As is the case with any loan, Dr. Sholin says a potential drawback is the impact of missed or late payments. Violating Cash App's loan terms, like not paying on time, could negatively affect your credit score, he says. If you're likely to forget when payments are due or don't understand or can't comply with the loan agreement, he recommends steering clear. "With something this accessible and quick, people might overlook some of the details," he says.
While a small loan can be helpful, the quick process and small amounts could accumulate quickly if you're not careful. "People who already struggle to get out of the debt cycle probably aren't going to benefit from a service like this," Dr. Sholin says, because it may be tempting to take out more money than you actually need or can manage to pay back. "With anything debt-related, people should always be cautious, and at a certain point it can be a slippery slope."
The Bottom Line
As long as you understand the terms and stick to your repayment plan, loans from Cash App Borrow can be a helpful and quick cash infusion. "If you're cautious and you approach it from the right mindset," Dr. Sholin says, "I think it could have some benefits."
