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Borrower Funding Definition

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When you need to borrow a little extra money, you often enter into an agreement with another person or company. This arrangement may be called a cash loan. You’re entering a contract as a borrower (the person needing money) to obtain cash from a lender (the person willing to loan that money). If you read the loan’s formal agreement or contract, it will identify you as the borrower.

When borrowing money, you may hear the term “borrower funded.” But what does “borrower funded” mean?

Understanding What “Borrower Funded” Means

If you receive a notice from the lender stating that your loan has been borrower-funded, that indicates the loan has been approved. They’ll begin making the money available to you as the borrower. Another way to say this is that your loan has been funded.

How Much Money Does the Borrower Receive?

When you apply for a loan, you ask the lender for a specific amount to cover your needs. The lender may approve, deny, or offer a different amount. It’s essential to know if there are transfer fees or other upfront costs you must cover at the beginning of the loan. The lender may deduct these fees from the loan total before you have the money to use. The amount that the borrower and lender agree upon (minus any fees) is the amount the borrower will receive.

How Long After a Loan Is Funded Do You Receive the Money?

Many lenders, like Power Finance Texas, take advantage of electronic banking. Lenders can process funds and transfer them directly from their account into the borrower’s account within a few hours. Depending on the rules at the borrower’s bank, those funds may not be immediately available.

Other lenders prefer to send funds to the borrower through a check in the mail. This can take up to a week and could be delayed by the processing time the bank might require after you deposit the funds.

How Are Funds Transferred from Lenders to Borrowers?

two people making an agreementThere are several ways a lender may provide borrowed funds.

  • Cash: A friend or paycheck advance office might hand you cash when you agree to the loan terms.
  • Check: You might also receive a check that you can cash or deposit into your bank account.
  • Prepaid cash card: Since checks are becoming less common, some places might issue a prepaid cash card with the loan balance instead.
    Electronic fund transfer (EFT): Once the loan is approved, the borrowed money is moved from the lender’s account directly into your bank account. This is the way you’d receive a loan from Power Finance Texas.

How Much of the Borrower Funds Must You Repay?

Most lenders will require a borrower to repay all the funds they were paid, plus additional fees or interest. These amounts will be agreed upon before the lender issues the loan, and the contract will provide the rules for how and when you’ll repay the money. If you don’t repay the loan, it’s called defaulting on the loan. This action has financial consequences that are also written into the loan contract.

How Do You Repay Borrowed Funds?

Once you’ve agreed to a contract and the lender has sent you the borrowed funds, you’re responsible for paying back that money according to the agreement. If you make the minimum payment every time it’s due, you’ll eventually pay off the money owed.

You may also pay a little extra with each regular payment, make an additional payment between the usual payments, or make one larger payment at the end of the loan to pay it off. If you pay extra with your regular payment or make other additional payments, these payments will help reduce the loan faster. These are called “principal-only” payments. If you make one larger payment at any time to pay off the entire loan amount, this is called a “balloon payment.”

Some loans allow these early payment methods. Some will not. Examine the loan agreement to see your options for paying off the loan.

Do You Need a Loan in Texas?

Talk to the personal loan experts at Power Finance Texas and see if you qualify!