How to Use PayPal’s “Buy Now Pay Later” and Installment Plans
With the boom of Buy Now Pay Later (BNPL) retail financing, the preference for no-interest installment plans has prompted popular payment apps like PayPal to launch their own versions. If you’re a regular user of PayPal who’s new to this form of payment, here’s a look at how it works and how to set it up.
What is BNPL?
BNPL is a short-term financing tool that let’s you pay for medium-sized purchases (usually $50-$600) in monthly installments, with no interest charged. The purchases are paid as installments spread out over a few months, with no interest charged. BNPL is sometimes called “digital layaway,” although unlike actual layaway programs, you get the product right away. Part of BNPL’s appeal is that you don’t need a good credit score to qualify for this form of credit.
How to Use PayPal’s “Pay in 4” and “Pay in 3”
Pay in 4 is simple to use if you know where to find it. When you’re at a retail site’s checkout page, look for the usual PayPal button as a payment option (there might be a “Pay Later” button, as well—both work). Provided that you already have a PayPal account that’s linked to a debit or credit card, toggling that button will take you to a payment screen.
You might have to scroll down, but you should see a “Pay Later” that includes “Pay in 4.” At that point, PayPal will have run a soft credit check (which doesn’t hurt your credit score) and you will either be approved or denied for the transaction. If you’re approved, then a payment summary will appear which you can accept by toggling the option and then selecting “continue” at the bottom of the screen.
Additionally, PayPal Pay in 3 is an interest-free loan that lets you split your basket into 3 payments, with the first due at time of purchase and subsequent payments due every month on the same date. Your plan will last 2 months in total. The first payment will be due at the time of purchase, followed by 2 further payments due each month after that.
Key Plan Details for Pay in 3
| Feature | Details |
|---|---|
| Purchase amount | £20.00-£3,000.00 |
| Number of payments | 3 interest-free payments |
| Sign-up and late fees | None |
| Buyer Protection | Included on eligible purchases |
Risks and Important Considerations
If you’re prone to overspend or don’t have a realistic plan to pay for purchases, then you’ll probably want to stay away from BNPL and stick to debit. While BNPL companies don’t charge you interest at first, some of them will begin doing once you get behind on your payments (PayPal does not). However, missing payments may make other borrowing more difficult or expensive. Pay in 3 is an unregulated credit agreement, so you will have fewer protections than under a regulated credit agreement.
If you’re using a debit card, these funds will drawn automatically when they’re due (although be careful with overdraft fees). If your PayPal is linked to a credit card, set up automatic payments immediately after you buy anything on an installment plan (in case you forget to do so later).
