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What is a Cash Loan?

A cash loan is the most basic kind of loan that a lender can make. In a cash loan, the lender provides a borrower with an amount of cash that has to be paid back with interest.

Traditionally cash loans were paid out in cash directly to borrowers. Many lenders still make cash loans to people without bank accounts. Today many cash loans involve the electronic transfer of funds directly into a borrower’s bank account.

The difference between a cash loan and traditional loans such as bank loans is that a cash loans have to be paid back very quickly. A bank loan may is usually an installment loan that can be paid off in a series of payments. Cash loans usually have to be paid back all out once in a very short period of time.

Cash Loans and Hard Money Loans

Another popular term for a cash loan is a hard money loan. The amount of a cash or hard money loan is based on the amount of money that a borrower can lay their hands on in the near future.

An example of this would be a payday loan, the amount of which is based upon the borrower’s salary. Another example of this would be a hard money loan to a business, based upon a business’s sales or cash flow.

The amount of a cash loan is usually based upon the amount of cash that a borrower can lay their hands upon. Borrowers who can’t prove they have a source of cash such as a job, business or government benefit won’t be able to get cash loans. 

To get most cash loans a person will have to present proof of income such as a pay stub or bank statement. Most cash lenders won’t lend money until the borrower has verified their income. In some cases a lender will loan money if an employer verifies employment.

The Cost of Cash Loans

The major difference between cash loans and other loans that most people will notice is the high cost of cash loans. The interest on cash loans is usually much higher and many cash loans will come with high fees attached.

Cash loans are more costly because lenders take a much higher risk by making them. Most cash loan lenders presume that their borrowers can’t tap into other sources of finance such as the bank or mortgage equity. Generally these lenders can’t traditional credit because they have a low income or a bad credit score.

The higher risks associated with cash loans can equal higher profits for lenders. Many lenders like cash loans because they are paid back quickly. The lender gets a fast return on his or her investment with a cash loan.

Types of Cash Lenders

There are many kinds of cash lenders out there some of which most people won’t be familiar with. 

Most people will be familiar with check, cash, payday and fast cash lenders which operate in most communities. These are storefront lenders that specialize in making small short term loans to low income people. In many cases these lenders function as banks for unsophisticated low income people who don’t have access to the financial system.

Many online lenders some of which are associated with national chains of fast cash lenders make cash loans to middle and working class people. Borrowers find these loans very attractive because all of the paperwork is done online and the funds are sent electronically. Online lenders often make borrowers a better deal than cash lenders.

Hard money or business cash advance lenders operate online. These lenders specialize in making cash loans to businesses that can’t get bank loans. Hard money loans are usually based upon a business’s cash flow.