DEFINITION of 'Cash Basis Loan'

A loan where interest is recorded as earned when payment is collected. Ordinarily, interest income is accrued on loans, since regular payment of both principal and interest is assumed. However, in the case of nonperforming loans (loans gone bad), continuing payments are doubtful. Cash basis loans are nonperforming loans, and interest income can only be recorded when funds are actually received.

BREAKING DOWN 'Cash Basis Loan'

Typically, loans are considered to have gone bad when they are in default for 90 days. Different definitions may apply, however, to consumer loans, residential mortgage loans and other secured assets.

RELATED TERMS
  1. Non-Performing Asset - NPA

    A classification used by financial institutions that refer to ...
  2. Nonperforming Loan - NPL

    A sum of borrowed money upon which the debtor has not made his ...
  3. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Non-Amortizing Loan

    A type of loan in which payments on the principal are not made, ...
  6. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
Related Articles
  1. Taxes

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  2. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  3. Taxes

    What Qualifies as a Nonperforming Asset?

    A nonperforming asset is a loan made by a financial institution to a borrower who has failed to make any scheduled payments for at least 90 days.
  4. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  5. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  6. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  7. Investing

    Japan's Nonperforming Loans Cap Future Growth

    Discover why Japan is lying about its banking sector, and how protecting underperforming Japanese businesses is stunting economic growth.
  8. Personal Finance

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  9. Investing

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  10. Investing

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
RELATED FAQS
  1. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  2. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
  3. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  4. Are direct consolidation loans subsidized?

    Direct Consolidation Loans are not subsidized. Students borrow Direct Subsidized Loans to pay tuition, room and board at ... Read Answer >>
Trading Center