Cash App Loans and the BETTER Alternatives to getting a loan

Cash App loans are absolutely the worst way to borrow money. The current terms state that any loan amount will result in an automatic 5% interest rate just for borrowing the money and you have 4 weeks to pay it back. At an average of 1.25% interest per week and 52 weeks a year, you’re paying 65% APR for the money you’re borrowing. That’s why we’ll go over the alternatives to Cash App loans so you can save money by getting a “sneaky loan” (that’s not really a term?).

I recently did a Cash App Review because of the amazing cashback. With 15% cashback or more at certain retailers, Cash App now has my business. There are also many risks that I mentioned. The focus for this post is why you should never get a payday loan or any type of loan where there interest rate is higher than a credit card. Cash App is pretty sneaky by saying they only charge 5% for a loan but that’s because it’s only for 4 weeks. Let’s dig into the details.

If you’re wondering how to get a loan from Cash App, please read this entire article. I don’t want you to waste your money paying finance charges (interest) when you don’t have to. I know sometimes people need a little help in rough times, but you can save yourself a lot of money with the right strategy.

How Do Cash App Loans Work?

I couldn’t find any info on the official Cash App website regarding how their loan system works, so this review is based on the information that TechCrunch uncovered. The basic terms of Cash App loans are:

  • You can borrow between $20 and $200
  • Loans must be paid back in 4 weeks
  • An additional 1 week grace period to pay back the loan is provided
  • You will pay a 5% fee for the loan if paid back within 5 weeks
  • If the loan is not paid back within 5 weeks, the interest rate on the borrowed amount will increase 1.25% EACH WEEK
  • The interest rate is really 60-65% when calculated as APR

I know, if you’re borrowing $200 from cash app and paying them back within a month that’s only 5% which is a $10 fee. That’s not a lot of money. But when you figure out that they are charging you 60% APR, it doesn’t make sense to borrow this money. Credit cards on average have an APR of 20% meaning you’ll pay 1/3rd of the interest on that same amount of money your borrowing.

But let’s say you actually need the cash to pay a bill or rent. That’s still possible. You can use a bill pay service like Plastiq to pay your rent or utilities using a credit card. You can even use Plastiq to pay off your mortgage (that’s what I did to meet credit card sign up bonuses).

How can I get access to a loan from Cash App?

Cash App is still rolling out this feature (as of August 2020) to their customers. I think they’ll do a small test sample to make sure the features work as intended before allowing everyone on the app to take out a small loan. I would assume you would have to have your full social security number and personal information registered with Cash App to take out a loan since Square is taking on a lot of risk by loaning out money.

4 Better Cash App Loan Alternatives:

#1 Any Credit Card (with the right timing)

Yes, using a credit card is already a better alternative than a loan from Cash App. The average credit card interest rate is around 20% APR compared to Cash App’s 60%. BUT, if you don’t carry a balance on your carry card and pay off completely every month, you can get away with a FREE loan from the credit card company for about 7 weeks.

Every month you have to pay your credit card. As long as you pay it off in full, your credit card company rewards you with a 21 day grace period to pay your bill without charging you any interest. We can take advantage of this.

Let’s say your statement date is on the 1st of every month. All new purchases starting on the 1st will appear on the next month’s credit card statement. That’s about 30 days, but let’s say 4 weeks to make it easy. Additionally, you get a 3 week grace period to pay your bill before the credit card companies start charging you interest (finance charges). That gives you 7-weeks of being able to use your credit card balance without having to pay any interest. When compared to the interest rate of Cash App Loans, this is a significantly better deal.

#2 Credit Cards with 0% APR

If you need an interest free loan to get by, I would highly recommend using a 0% APR credit card (see: Hacking Your Debt). Just remember not use go over your credit utilization if you want to maintain a healthy credit score. But, I’d rather have a lower credit score for a few months than to pay any additional money to finance charges.

A majority of the 0% APR credit cards even give you a sign up bonus as a statement credit. Who doesn’t like free money, right? The 0% APR credit cards on this list have 0% APR available for 12 to 20 months. That’s a pretty good loan. But if you need “cash” to pay a bill, there’s still more to learn. As I mentioned earlier, you can use bill paying services like Plastiq (2.85% fee) to pay your rent, utilities, tuition and most other bills (not credit cards).

With your 0% APR credit card, you can use Plastiq to pay your bills (for a 2.85% fee) to get you through the tough times. That’s a pretty good deal which beats most loans. Let’s say after a year you still can’t pay off your credit card and bills. I know, it’s tough but this is an affordable solution: Get another 0% APR credit card. More credit cards CAN be the solution.

I’ll dig into more details in the next section, but with another 0% APR credit card, you can send a relative (or trusted friend) money with a credit card through PayPal (2.9% fee) which they can convert to cash for you. With that money, you can pay off the credit card with upcoming interest. In a sense, you’re just juggling debt and optimizing your loans. Alternatively, many banks offer balance transfers for 2% to 3% to help you pay your bills. It’s provided to you as a physical check.

Obviously, going into debt is always bad. But when times are tough, you can’t help it. You need a little loan to get you by, so why not do it in the most effective way possible.

#3 Getting Cash From Your Credit Card

Cash Advance: If you directly withdraw money from your credit card, it’s going to be a cash advance that comes with high fees and interest. This is not a good idea, but keep reading for the cheaper alternatives.

Balance Transfer: Many credit cards have promotional offers for a 0% APR balance transfer. The bank will provide you checks you can use to pay off any other debt (like other credit card bills). Just be aware that each balance transfer typically has a fee of 3%. I have seen some balance transfers as low as 2% but it depends on the bank.

PayPal/Venmo: PayPal and Venmo are basically the same company. You can send money to friends and family using a credit card for a 2.9% fee. This is a great option if you want to use your credit card to send someone you trust money through PayPal and then provide you cash. Just start with amounts for $100 or less otherwise PayPal may freeze your account.

Plastiq: You can pay your rent, mortgage, loans, utilities and other bills using Plastiq for a 2.85% fee. It’s not exactly getting cash from your credit card, but if you needed cash to pay these bills, it’s just as good.

#4 Loans from a bank

Getting approved for a personal loan is a lot of work. If you don’t have good credit, you’ll definitely see higher interest rates. I have several post on how to improve your credit score so take a look at those. If you want to get a decent interest rate, I highly recommend looking for loans at credit unions in your city. They offer better rates than the big banks.

Instead of getting a personal loan, if you have equity in your home you can take out a HELOC Loan. A HELOC (Home Equity Line of Credit) uses your home as collateral and provides you with loans around 5% interest. Still not as low as the other alternatives I mentioned, but this can be for a big purchase.


Cash App loans have a 5% interest rate that need to be paid back within 5 weeks. This is a stupid high interest rate but structured in a way to make people think it’s not a lot of money. It’s true, that is a low number, but when factored annually, it’s about 65% APR while credit cards average around 20% APR. That’s 3X more money spent. When compared to a 3% balance transfer (or my tricky methods), Cash App loans will cost you 22x more.

I know Cash App targets a younger audience that isn’t as financially savvy so they are taking advantage of their customers. Cash App is slick and makes everything look simple, but the fees on these loans are almost predatory. Be smart and look for that full value.