PayPal: a Reliable Online Lending Service

PayPal: a Reliable Online Lending Service
PayPal: a Reliable Online Lending Service
August 29, 2016

There is a plethora of online lending businesses in the recent years, and new ones are popping up everywhere. But sometimes an online service will add a new feature to it and surprise us, like the major player on the scene like PayPal deciding to become a lender as well.

PayPal decided to use all the cash they generated

PayPal created a new option to their customers and merchants as they have decided to use all the money they have amounted to over the years. It is a logical step forward for a business such as theirs and it certainly makes things easier for their users.

Read also: Merits and Demerits of Purchase Money and Non-purchase Money Loans in Short Sales

PayPal Credit is designed for consumers

The company is letting you use your PayPal account in a similar way in which you would use your credit card. If you have a PayPal account, you can apply for the new Credit option and wait for your approval. In the first four months, you will get interest-free payments, and after that it’s 17.9%.

PayPal Working Capital is designed for merchants

If you are a PayPal merchant, you can apply for this option, but only if your company makes $20,000 a year or more on PayPal. After that they will calculate how much money you can lend from them based on your annual sales. So, you can lend 15% of that amount. That may not seem as much but they are less expensive than other online lenders.

This new option does not make PayPal a bank

So, in case you don’t know, PayPal is a transaction processor, not a bank. The banking partners of PayPal lend the money as the company is not a licensed lender yet.

Read also: A Cash Business Loan might Just be Perfect for a Working Capital

Here is a better explanation of the process

So, we now understand that PayPal is not a bank, or a licensed lender, but they do own the loan they give to customers and merchants although the bank still is the owner of the account.

Cheaper than other lending services

Most online lending services have very high interest rates on loans, and PayPal has jumped up in front of the competition with a great idea. For example, the interest rate for customers on a loan 19,9% but customers can completely avoid if they pay it back within the agreed time frame.

The repayment program for the merchants is great

For PayPal merchants, there is also a really good way to pay back the loan. PayPal will not charge interest but give the option to merchants to choose a percentage of sales that they will send to PayPal for repaying. There is no time limit, but the borrowing fee is less if the repayment percentage is higher.

Read also: What You Never Knew about the Small Business Administration Loans

The size of the loans is not big

It may be the case that the size of the loans is not as big as with some other online lending platforms like Lending Club and OnDeck, but they have an exceedingly strong brand and a good customer policy and they can draw a lot of people in with the low or nonexistent interest rates.

Easy to get a loan if you are a PayPal merchant

In case you are already a PayPal merchant, it is fairly simple and easy to get a loan, because PayPal already has all the information of your finances they need to have, and you don’t need to collect a huge stack of papers and take it to a bank, all you need to do is click a few buttons and you have your loan.

Read also: Looking for Ways to Finance Your Company: Try Asset Based Lending

Article highlights

  • Online lending businesses are growing every day.
  • PayPal has made the decision to join the race.
  • PayPal users will have an easy time lending money now.
  • For customers it is like using a credit card.
  • The merchant program is based on the amount of annual sales on PayPal.
  • You can borrow money if your sales is $20,000 annually or more.
  • A merchant can borrow up to 15% of their annual sales.
  • It will attract people with excellent repayment programs.
  • The loans are not as big as on other online lending services.
  • You should know that PayPal is not a bank.

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