American shoppers have plenty of choices when it comes to buy now, pay later (BNPL) services. One of the more well-known platforms is PayPal Pay in 4. If you’ve noticed Pay in 4 as a payment option when you shop online but haven’t tried it yet, you may wonder how it works.
Here’s everything you need to know about using PayPal Pay in 4, including which online sites accept it, how to apply and how it affects your credit score.
What is PayPal Pay in 4?
PayPal Pay in 4 is the online payment system’s buy now, pay later program. It gives you the option to split certain PayPal purchases into four equal, interest-free payments over a period of six weeks.
Pay in 4 is a widely available financing option that’s accepted by millions of online retailers worldwide, from small businesses to major corporations like Target, The Home Depot and Best Buy.
How PayPal Pay in 4 works
Like other BNPL programs, PayPal Pay in 4 lets you buy what you need now and spread out the payments over time. A down payment is due at the time of purchase, and the remaining three payments are due every 15 days until the balance is paid off.
For example, imagine you use PayPal Pay in 4 to make a $1,000 purchase from your favorite clothing retailer. You owe 25 percent of the balance ($250) when you check out. Then, you owe another $250 every 15 days until you’ve paid the entire bill.
Conveniently, you don’t need to remember to make each payment. PayPal automatically withdraws your payments from the bank account, debit card or credit card you provided when you applied.
How much can you borrow?
You can borrow between $30 and $1,500 using PayPal Pay in 4.
If you want to borrow more than $1,500, PayPal offers its Pay Monthly program. With Pay Monthly, you can finance between $199 and $10,000. Unlike Pay in 4, Pay Monthly loans charge interest.
Who is eligible?
PayPal Pay in 4 is not available for all online shopping carts. Some merchants have opted out of Pay in 4, and financing may not be available for certain recurring subscription services. Unfortunately, shoppers who live in Missouri or Nevada are not currently eligible to use Pay in 4.
If you’re able to apply for Pay in 4, you’ll see it listed as an available payment option at checkout. To qualify, you must be at least 18 years of age and have a PayPal account in good standing. PayPal may perform a credit check, though it doesn’t disclose a specific minimum credit score requirement.
How much does PayPal Pay in 4 cost?
There are no fees to use PayPal Pay in 4. The program has no sign-up fee, and the loans are interest-free. There are also no late fees or prepayment penalties.
However, it’s possible to run into unexpected costs with the service. If a Pay in 4 payment brings your bank account balance below zero, your bank may charge overdraft fees or non-sufficient funds (NSF) fees. According to recent Bankrate data, the average overdraft fee is $27.08, while NSF fees average $17.72.
Does PayPal Pay in 4 affect your credit?
Applying for a PayPal Pay in 4 loan will not impact your credit score. The company performs a soft credit check during the application process. Only you can see the soft inquiries on your credit report, and they don’t affect your score.
BNPL services typically aren’t factored into credit scores, either. That means a history of on-time installment payments usually doesn’t help build credit. If your goal is establishing or repairing your credit, you may prefer PayPal’s Pay Monthly installment loan, which may be reported to the credit bureaus.
Risks of buy now, pay later services
BNPL plans are a convenient way to make purchases and pay them off over time, though there are some potential risks to be aware of. A recent Bankrate survey found that many BNPL users reported trouble with the services. Some of the main issues are:
- You may be tempted to overspend: BNPL is convenient because you only need to cover a portion of the cost at the time of purchase, but that convenience can make it easy to lose sight of your budget. Among BNPL shoppers, 29 percent say they’ve had issues with overspending.
- You may buy things you don’t need: Using BNPL plans to cover impulse purchases or other unnecessary items can be tempting. Nearly one-fifth of shoppers (17 percent) say they’ve regretted a BNPL purchase.
- You may have trouble tracking payments: Many people have more than one BNPL plan at the same time, and missing payments is an issue for 18 percent of BNPL shoppers. PayPal helps reduce this risk by displaying all your upcoming repayments in the Pay Later section of your PayPal account.
Who Pay in 4 is best for
BNPL programs like PayPal Pay in 4 are a good financing option for some people. It might make sense to use PayPal Pay in 4 if:
- You aren’t eligible for other lending: BNPL programs like Pay in 4 can be useful tools for people who can’t get approved for a credit card or personal loan.
- You’re buying a necessary item: If you need to buy something immediately but don’t have money to cover the purchase, Pay in 4 can be a good option for short-term, no-cost borrowing.
- You’re good at sticking to a budget: If you feel confident you won’t be tempted to overspend or make impulse purchases, BNPLs may be right for you.
How to use PayPal Pay in 4
If you’re interested in using PayPal Pay in 4, get started by adding items to your online shopping cart just like you normally would. When it’s time to check out, take the following steps:
- Select PayPal Pay in 4: Choose PayPal when you checkout, and then select Pay in 4 as your payment method.
- Read the loan agreement: PayPal will display the terms and conditions for the loan. Review the terms to ensure you understand what you’re signing up for.
- Get a decision: The decision process is automated, so you’ll know almost instantly if you’re approved for Pay in 4.
- Finish checking out: If you’re approved, you’ll be redirected to provide a payment method. Your chosen method will be used to pay for the down payment and three bi-weekly payments.
- Pay off your Pay in 4 loan: Make sure you have enough money in your chosen debit card, credit card or bank account to cover the automatic repayments.
Pay in 4 alternatives
PayPal’s Pay in 4 is a good option for some consumers, but it may not be the best choice for you. Depending on the amount of money you want to borrow and how long you need to repay it, other financing options might be a better fit. Here’s an overview of some Pay in 4 alternatives.
Other BNPL plans
Other companies offer pay-in-four plans that are similar to PayPal’s Pay in 4, and depending on your needs, another option might be a better fit. For example, Klarna does not set a maximum loan amount, so it might be better if you want to borrow more than Pay in 4’s $1,500 limit.
0 percent intro APR credit cards
PayPal’s Pay in 4 loans don’t have interest, but the repayment period is short. If you need more than six weeks to pay off an upcoming purchase, consider a 0 percent APR credit card. After opening the card, you’ll have zero interest for a limited time — typically between 12 and 21 months.
Personal loans
Personal loans are another way to borrow a larger amount of money with a longer repayment period. These loans allow you to borrow a lump sum you repay in monthly installments over a set period (typically one to seven years). Unlike Pay in 4, personal loans charge interest.
Personal line of credit
A personal line of credit is a flexible option for borrowing money. Like a credit card, you receive a credit limit and can withdraw funds as needed for purchases. You only pay interest based on your outstanding balance, and the rates tend to be lower than a credit card.
Cash
Since the loan term for a PayPal Pay in 4 plan is only about six weeks, paying cash can be a practical alternative in some cases. For example, if you’re planning a non-essential purchase, you might set aside the equivalent of the installment payment every two weeks until you have enough to pay outright.
The bottom line
PayPal Pay in 4 is a well-known buy now, pay later plan that lets you split your online shopping cart into four interest-free payments. It can be a good option for people who aren’t eligible for other loans, as well as those who want a convenient, interest-free way to borrow money.
However, if you want to borrow more than $1,500 or finance a purchase for longer than six weeks, a credit card or personal loan might make more sense.
Frequently asked questions
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