Cash Basis Loan

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. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  2. Non-Amortizing Loan

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

    In the banking industry, a problem loan is one of two things; ...
  4. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  5. Cumulative Interest

    The sum of all interest payments made on a loan over a certain ...
  6. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
Related Articles
  1. Credit & Loans

    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. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  3. Credit & Loans

    Student Loans: Federal Loan Consolidation

    Federal loan consolidation is a helpful tool for converting an unmanageable payment into a manageable payment by combining multiple semester loans into one loan and extending your repayment schedule. ...
  4. Personal Finance

    Simple Interest Loans: Do They Exist?

    Yes, they do. Here is what they are – and how to use them to your advantage.
  5. Credit & Loans

    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.
  6. Professionals

    Introduction To Loans

    Learn about the many types of loans and how they function in business.
  7. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  8. Retirement

    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.
  9. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  10. Credit & Loans

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  4. 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 >>
  5. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
  6. What does it mean to capitalize accrued interest?

    Understand what it means when a company capitalizes accrued interest. Learn what constitutes accrued interest and what constitutes ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center