Since March 2020, “buy now, pay later” (BNPL) plans have become increasingly popular. For instance, the BNPL app Afterpay, a service provider, reported a 186 percent rise in sales in November 2020 over the same month the year prior.
PayPal’s Pay in four installments service is one way the company has joined the BNPL movement. If you’re having trouble making ends meet, finding out about other BNPL programs and how to Pay in 4 can make it easier for you to make some purchases without paying in full.
What Is PayPal’s Pay in 4?
Pay in 4 is a BNPL service that enables you to shop at millions of online retailers without paying the entire amount upfront. It is also commonly referred to as a point-of-sale installment loan. Instead, you will make four equal payments that are interest-free to cover your debt.
You can utilize the program to make some purchases more affordable by paying them off gradually rather than all at once, albeit there are some restrictions and limitations. For someone who would ordinarily use a high-APR credit card that charges interest as they pay down the balance, it is very advantageous.
How Does PayPal’s Pay in 4 Work?
For purchases between $30 and $600, the Pay in 4 programs is accessible at the millions of online retailers that accept PayPal.
When you’re prepared to buy, choose PayPal as your method of payment. If it’s an option, you can select Pay in 4 from there. To fund the payment plan, choose one of the accounts you’ve linked to your PayPal account (such as a checking, credit, or debit card). You’ll pay the first payment on the day of the purchase and three more payments over the course of the following six weeks if you’re authorized.
For instance, if you used Pay in 4 to make a $100 purchase, you would pay $25 as a down payment when you completed the transaction, followed by three payments of $25 each more $25 payments, one every 15 days.
How Much Does It Cost?
There are no origination or interest costs with Pay in 4. However, depending on the state in which you live, you might have to pay a penalty if you’re late with a payment.
Most individuals probably won’t have a problem with late payments because PayPal will automatically charge the debit or credit card you provided when you first applied for the loan. However, if you don’t have enough money in your bank account or credit available on your credit card to cover it, you can have some problems. You can get into your PayPal account and modify your payment method if you foresee it happening.
How Does It Affect My Credit Score?
PayPal may perform a mild credit check when you apply to use Pay in 4 to determine your eligibility, but it won’t affect your credit score.
Who Is Eligible?
In 44 states and the District of Columbia, pay in four is an option. Georgia, New Mexico, North Dakota, Missouri, South Dakota, and Wisconsin are the states that aren’t included. Additionally, the service is not accessible in American territories.
You must have a PayPal account that is active and be at least 18 years old or 19 in Alabama and Nebraska. You can open a PayPal account if you don’t already have one.
Which Items Are Eligible?
The Pay in 4 services is available for both physical and certain intangible items as well as digital services. Pay in 4 transactions are not permitted from get-rich-quick scams, NGOs, or online services, among other company categories.
Can I Pay Off the Loan Early?
Yes, you can settle the remaining sum on your Pay in 4 loans early by simply logging into your PayPal account.
Alternatives to PayPal’s Pay in 4
One of the various BNPL services you may use to pay for a purchase over time is PayPal’s Pay in 4.
A credit card is one of the more popular solutions, but unless you have an introductory APR of 0%, you can end up with a high-interest rate that punishes you with interest charges for each month you don’t pay off your purchase.
Here are some possibilities if you like the idea of Pay in 4 but wish to compare related choices.
Similar to Pay in 4, Afterpay enables you to spread out purchases over a six-week period with four interest-free installments. However, in addition to online shops, Afterpay also accepts some in-store purchases from chosen merchants. The following businesses accept Afterpay for in-person purchases:
- Dick’s Sporting Goods
- Forever 21
However, with only 11,500 brands in the US, Afterpay’s list of partner retailers is far shorter than PayPal’s. On the other hand, Afterpay does not demand a credit check.
For in-store purchases, Klarna works with participating merchants, and its app enables you to use installment payments virtually any place online.
You can choose a six-week installment plan with no interest or fees like those that PayPal and AfterPay provide, or you can apply for financing on larger purchases. Repayment time for financing ranges from six to 36 months with a 19.99% APR.
Although Splitit employs slightly different words, it operates on the same principle as other BNPL services. The company divides your purchase amount into three installments over two months rather than four over six weeks: one-third on the date of purchase, another third one month later, and the last third the following month.
Interest and late fees are not levied by the business. Your account will be put on hold by Splitit if you use a debit or credit card. With a $300 purchase, here is how that hold operates:
- Credit cards: You pay $100 the day of your purchase. Splitit holds $200 on your card as a pending purchase. The hold drops to $100 when you make your next $100 payment, then to $0 when you make your final payment.
- Debit cards: The full amount of the purchase is held for up to five business days after your purchase.
The hold means that using Splitit might not be an option if you don’t have enough money in your account to pay for the complete purchase. In comparison to PayPal and Klarna, the retailer directory is somewhat smaller, and its payment options only accept Visa and Mastercard.
Frequently Asked Questions (FAQs)
Where can I use PayPal Pay in 4?
You should be able to utilize PayPal Pay in 4 everywhere PayPal is accepted if you have a PayPal account.
Is Buy Now Pay Later a loan?
An installment loan is a Buy Now, Pay Later, or BNPL. With these loans, you can swiftly get accepted to make an online purchase, and the lender will subsequently pay the retailer on your behalf. Payments are made in installments to the lender. If you don’t have a credit card, BNPL may be useful, but it may also pose issues if you are unable to make your subsequent payments.
Does BNPL help your credit?
Currently, payments you make for BNPL loans, such as PayPal Pay in 4, are typically not recorded on your credit report. Even though missed payments may lower your credit score, they do not increase your credit score. However, BNPL is becoming popular enough that credit bureaus are looking for ways to include that information in credit reports.