Apple to fund pay-later loans off its own balance sheet

Apple Inc plans to fund loans for its forthcoming Apple Pay Later service off its corporate balance sheet, the company said on Wednesday.

Apple said its treasury department will decide the exact mechanism it will use to fund the loans and funding sources may shift over time. Loans and creditworthiness decisions will be handled by a wholly owned subsidiary, Apple Financing LLC.

Apple announced the pay-later service this week, offering to split purchases up into four equal payments over six weeks. The service will launch later this year along with Apple's latest operating systems for iPhones and iPads and will put it into competition with existing buy-now, pay-later firms such as Affirm Holdings Inc and Block Inc's Afterpay.

Apple's pay-later loans will have zero interest and no fees of any kind. To judge creditworthiness, Apple said it plans to use a soft pull of a customer's credit and other data, such as the customer's purchase and payment history with Apple in both its stores and online services such as the App Store.

To use the pay-later service, Apple customers will have to connect a debit card to their Apple Pay account to fund repayment of the loans. A quarter of the purchase price for approved loans will be due at the time of purchase, and, like other debit card transactions, Apple will run an instant check to ensure there are sufficient funds to cover the upfront payment.

Apple will offer the loans anywhere that Apple Pay is accepted, both online and in physical retail stores. The payments to merchants will be made over the MasterCard network through a payment credential issued by Goldman Sachs Group Inc, Apple said.

Apple Financing LLC has lending licenses in all US states where such pay-later services are allowed, it added.