Need $200 fast? Square’s Cash app is experimenting with short-term loans

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In short: Need a small short-term loan quickly? There are always payday lenders, but their average annual 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 finds it effective, expect a wider rollout. The pandemic has caused economic hardship around the world, and a short-term cash injection could help many people, provided they repay on time.

cash app currently limits its loan amounts between $20 and $200, though that would likely increase if availability were expanded. You have four weeks to repay the loan, and there’s a fixed interest charge of 5%, which means it’s an APR of 60%. That’s certainly high, but most payday lenders and less 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 interest of 1.25% (not compounded) will be added every week. Failure to pay means that you will not 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. Tech Crunch. “We look forward to hearing their feedback 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 applications that require full loan repayment within 61 days, so it will be interesting to see how cash app deals with these rules.

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