PayPal’s buy now, pay later (BNPL) payment option has proven very popular with online shoppers. Now, the company has announced its plans to expand on this further by adding “PayPal Pay Monthly” to its list of payment options.
The pay monthly service will allow consumers to make larger purchases and spread payments over a more extended period of time, giving the same flexibility as a personal loan.
BNPL purchases are usually broken up into two or three payments, with equal payments being spread over several weeks or months, giving consumers more time to pay for their purchase.
Pay monthly will target a different segment of customers – it will allow people to make purchases of up to $10,000 and make payments for up to 24 months in total.
How does it work?
To use the PayPal Pay Monthly service, customers will need to download the PayPal app and complete an application at the checkout. There will be a credit check for all applicants and, if approved, the customer will be offered up to three plans.
The length of the plans they are offered and the interest rate will depend on their credit history. PayPal says that buyers will usually be offered an interest rate of between 0% and 29.99%.
This product works in a very similar way to a personal loan and follows PayPal’s claims that there is a growing demand for more variety of payment options for customers.
The main difference between Pay Monthly and a traditional personal loan is that the maximum amount that can be borrowed is smaller. Additionally, the repayment terms are shorter.
BNPL has grown in popularity in recent years and is offered by a wide range of apps. However, there have been some problems and consumer groups have called for better regulation.
For example, platforms have been accused of encouraging consumers to overstretch their finances and research shows that a lot of customers fall behind on their repayments. Pay Monthly could offer a more affordable alternative in some circumstances.