In short: Need a small, short term loan quickly? There are still payday lenders, but their average annual percentage rate is almost 400%. A better option may soon come from Cash App, Square’s mobile payment app.
The company is currently testing the feature with around 1,000 users, but if Square deems it successful, expect a wider rollout. The pandemic has caused economic hardship around the world, and a short-term injection of cash could help many people, provided they pay it back on time.
App Cash currently limits its loan amounts to between $ 20 and $ 200, although that would likely increase if availability was extended. You have four weeks to repay the loan, and there is a fixed interest charge of 5 percent, which means it’s an APR of 60 percent. It’s certainly high, but most payday lenders and lesser reputable companies charge average three- and four-digit percentage rates.
If for some reason you cannot repay the loan within four weeks, there is an additional one week grace period. After that, an additional 1.25% (uncompounded) interest will be added each week. In the event of default, you will no longer be able to take out additional loans.
“We are always testing new features in Cash App and recently began testing the ability to borrow money with approximately 1,000 Cash App customers,” a company spokesperson said in a statement. TechCrunch. “We look forward to hearing their comments and learning from this experience.”
Last year, Google banned apps from its store that allow personal loans with an APR of 36% or more. It also doesn’t allow apps that require a full loan repayment within 61 days, so it’ll be interesting to see how. App Cash discusses these rules.