LOANS AND INTEREST RECEIVABLE

6 Months Ended

Jun. 30, 2025

LOANS AND INTEREST RECEIVABLE, HELD FOR SALE

In June 2023, we entered into a multi-year agreement with a global investment firm to sell our eligible consumer installment receivables portfolio, including a forward-flow arrangement for the sale of future originations. In December 2024, this agreement was amended and restated to extend the commitment period to December 2026 and to increase the maximum balance of loans that can be sold at a time. Loans and interest receivable, held for sale are recorded at the lower of cost or fair value, determined on an aggregate basis, with valuation changes and any associated charge-offs recorded in restructuring and other on our condensed consolidated statements of income (loss).

As of June 30, 2025 and December 31, 2024, loans and interest receivable, held for sale was $817 million and $541 million, respectively. During the six months ended June 30, 2025, we derecognized loans with an unpaid balance of $11.6 billion and had net proceeds of $11.6 billion from loans and interest receivable sold in connection with the above-mentioned agreement. During the six months ended June 30, 2024, we derecognized loans with an unpaid balance of $9.7 billion and had net proceeds of $9.6 billion, from loans and interest receivable sold in connection with the above-mentioned agreement.

LOANS AND INTEREST RECEIVABLE, NET

Consumer receivables

We offer revolving and installment credit products as a funding option for consumers in certain checkout transactions on our payments platform. Our revolving credit product consists of PayPal Credit in the U.K., which is made available to consumers as a funding source in their PayPal wallet once they are approved for credit. Additionally, we offer installment credit products at the time of checkout in various markets, including the U.S., several markets across Europe, Australia, and Japan. We offer non interest-bearing installment credit products in these markets as well as interest-bearing installment credit products in the U.S. and Germany. We purchase receivables related to interest-bearing installment loans extended to U.S. consumers by an independent chartered financial institution (“partner institution”) and are responsible for the servicing functions related to that portfolio. During the six months ended June 30, 2025 and 2024, we purchased approximately $602 million and $217 million in consumer receivables, respectively. As of June 30, 2025 and December 31, 2024, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $5.8 billion and $5.4 billion, respectively, net of the participation interest sold to the partner institution of $26 million and $23 million, respectively.

We closely monitor the credit quality of our consumer receivables to evaluate and manage our related exposure to credit risk. Credit risk management begins with initial underwriting and continues through the full repayment of a loan. To assess a consumer who requests a loan, we use, among other indicators, internally developed risk models using detailed information from external sources, such as credit bureaus where available, and internal data, including the consumer’s prior repayment history with our credit products where available. We use delinquency status and trends to assist in making (or, for interest-bearing installment loans in the U.S., to assist the partner institution in making) new and ongoing credit decisions, to adjust our models, to plan our collection practices and strategies, and in determining our allowance for consumer loans and interest receivable.

Consumer receivables delinquency and allowance

The following tables present the delinquency status and gross charge-offs of consumer loans and interest receivable by year of origination. The amounts are based on the number of days past the billing date for revolving loans or contractual repayment date for installment loans. The “current” category represents balances that are within 29 days of the billing date or contractual repayment date, as applicable.


June 30, 2025
(In millions, except percentages)

	Revolving Loans Amortized Cost Basis		Installment Loans Amortized Cost Basis
			2025		2024		2023		2022		2021		Total		Percent
Consumer loans and interest receivable:
Current	$	2,627	$	2,075	$	630	$	229	$	17	$	—	$	5,578	96.2%
30 - 59 Days	29		38		12		6		—		—		85		1.4%
60 - 89 Days	17		18		7		3		—		—		45		0.8%
90 - 179 Days	40		22		25		5		1		—		93		1.6%
Total	$	2,713	$	2,153	$	674	$	243	$	18	$	—	$	5,801	100%
Gross charge-offs for the six months ended June 30, 2025	$	67	$	1	$	71	$	12	$	1	$	—	$	152


December 31, 2024
(In millions, except percentages)

	Revolving Loans Amortized Cost Basis		Installment Loans Amortized Cost Basis
			2024		2023		2022		2021		2020		Total		Percent
Consumer loans and interest receivable:
Current	$	2,404	$	2,427	$	353	$	43	$	—	$	—	$	5,227	96.6%
30 - 59 Days	25		28		4		—		—		—		57		1.1%
60 - 89 Days	16		19		4		1		—		—		40		0.7%
90 - 179 Days	38		40		9		2		—		—		89		1.6%
Total	$	2,483	$	2,514	$	370	$	46	$	—	$	—	$	5,413	100%
Gross charge-offs for the year ended December 31, 2024	$	138	$	39	$	133	$	14	$	—	$	—	$	324

The following table summarizes the activity in the allowance for consumer loans and interest receivable for the six months ended June 30, 2025 and 2024:


	June 30, 2025						June 30, 2024
	Consumer Loans Receivable		Interest Receivable		Total Allowance		Consumer Loans Receivable		Interest Receivable		Total Allowance
	(In millions)
Beginning balance	$	341	$	7	$	348	$	357	$	23	$	380

Provisions	117		6		123		106		10		116
Charge-offs	(143)		(9)		(152)		(165)		(13)		(178)
Recoveries	33		—		33		25		—		25
Other(1)	25		—		25		(11)		—		(11)
Ending balance	$	373	$	4	$	377	$	312	$	20	$	332

(1) Includes amounts related to foreign currency remeasurement.

The allowance for credit losses at June 30, 2025 for our consumer receivable portfolio was $377 million, an increase from $348 million at December 31, 2024. The increase in allowance for credit losses was primarily attributable to growth in revolving loans in the U.K. and installment loans in Japan. In the second quarter of 2025, we updated our expected credit loss model for our revolving loans in the U.K. to reflect the utilization of average weekly earnings as a macroeconomic factor and no longer consider household disposable income and retail e-commerce sales. Additionally, we updated our expected credit loss model for certain portfolios to utilize multiple economic scenarios rather than the single scenario previously utilized. These changes did not have a material impact on our allowance for credit losses in the period.

Merchant receivables

We offer access to merchant finance products for certain small and medium-sized businesses through our PayPal Working Capital (“PPWC”) and PayPal Business Loan (“PPBL”) products, which we collectively refer to as our merchant finance offerings. We purchase receivables related to credit extended to U.S. merchants by a partner institution and are responsible for the servicing functions related to that portfolio. During the six months ended June 30, 2025 and 2024, we purchased approximately $1.0 billion and $774 million in merchant receivables, respectively. As of June 30, 2025 and December 31, 2024, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $1.7 billion and $1.5 billion, net of the participation interest sold to the partner institution of $59 million and $53 million, respectively.

Through our PPWC product, merchants can borrow a certain percentage of their annual payment volume processed by PayPal and are charged a fixed fee for the loan or advance based on the overall credit assessment of the merchant. Loans and advances are repaid through a fixed percentage of the merchant’s future payment volume that PayPal processes. Through our PPBL product, we provide merchants access to short-term business financing for a fixed fee based on an evaluation of the applying business as well as the business owner. PPBL repayments are collected through periodic payments until the balance has been satisfied.

The interest or fee is fixed at the time the loan or advance is extended and is recognized as deferred revenue in accrued expenses and other current liabilities on our condensed consolidated balance sheets. The fixed interest or fee is amortized into revenues from other value added services based on the amount repaid over the repayment period. We estimate the repayment period for PPWC based on the merchant’s payment processing history with PayPal. For PPWC, there is a general requirement that at least 10% of the original amount of the loan or advance plus the fixed fee must be repaid every 90 days. We calculate the repayment rate of the merchant’s future payment volume so that repayment of the loan or advance and fixed fee is expected to generally occur within 9 to 12 months from the date of the loan or advance. On a monthly basis, we recalculate the repayment period based on the repayment activity on the receivable. As such, actual repayment periods are dependent on actual merchant payment processing volumes. For PPBL, we receive fixed periodic payments over the contractual term of the loan, which generally ranges from 3 to 12 months.

We actively monitor receivables with repayment periods greater than the original expected or contractual repayment period, as well as the credit quality of our merchant loans and advances that we extend or purchase, so that we can evaluate, quantify, and manage our credit risk exposure. To assess a merchant seeking a loan or advance, we use, among other indicators, risk models developed internally which utilize information obtained from multiple internal and external data sources to predict the likelihood of timely and satisfactory repayment by the merchant of the loan or advance amount and the related interest or fee. Primary drivers of the models include the merchant’s annual payment volume, payment processing history with PayPal, prior repayment history with PayPal’s credit products where available, information sourced from consumer and business credit bureau reports, and other information obtained during the application process. We use delinquency status and trends to assist in making (or, in the U.S., to assist the partner institution in making) ongoing credit decisions, to adjust our internal models, to plan our collection strategies, and in determining our allowance for these loans, advances, and interest and fees receivable.

Merchant receivables delinquency and allowance

The following tables present the delinquency status and gross charge-offs of merchant loans, advances, and interest and fees receivable by year of origination. The amounts are based on the number of days past the expected or contractual repayment date for amounts outstanding. The “current” category represents balances that are within 29 days of the expected repayment date or contractual repayment date, as applicable.


June 30, 2025
(In millions, except percentages)
	2025		2024		2023		2022		2021		Prior		Total		Percent
Merchant loans, advances, and interest and fees receivable:
Current	$	1,158	$	311	$	10	$	7	$	1	$	6	$	1,493	89.9%
30 - 59 Days	30		37		5		1		—		—		73		4.4%
60 - 89 Days	12		19		3		1		—		—		35		2.1%
90 - 179 Days	9		37		4		2		—		—		52		3.1%
180+ Days	—		5		2		1		—		—		8		0.5%
Total	$	1,209	$	409	$	24	$	12	$	1	$	6	$	1,661	100%
Gross charge-offs for the six months ended June 30, 2025	$	—	$	42	$	14	$	2	$	—	$	1	$	59


December 31, 2024
(In millions, except percentages)
	2024		2023		2022		2021		2020		Prior		Total		Percent
Merchant loans, advances, and interest and fees receivable:
Current	$	1,274	$	28	$	13	$	1	$	8	$	4	$	1,328	90.4%
30 - 59 Days	55		10		3		—		—		1		69		4.7%
60 - 89 Days	23		6		2		—		—		—		31		2.1%
90 - 179 Days	21		11		4		—		—		—		36		2.4%
180+ Days	1		4		1		—		—		—		6		0.4%
Total	$	1,374	$	59	$	23	$	1	$	8	$	5	$	1,470	100%
Gross charge-offs for the year ended December 31, 2024	$	10	$	96	$	42	$	—	$	8	$	—	$	156

The following table summarizes the activity in the allowance for merchant loans, advances, and interest and fees receivable for the six months ended June 30, 2025 and 2024:


	June 30, 2025						June 30, 2024
	Merchant Loans and Advances		Interest and Fees Receivable		Total Allowance		Merchant Loans and Advances		Interest and Fees Receivable		Total Allowance
	(In millions)
Beginning balance	$	107	$	6	$	113	$	148	$	12	$	160
Provisions	69		8		77		31		(1)		30
Charge-offs	(55)		(4)		(59)		(89)		(5)		(94)
Recoveries	12		—		12		14		—		14
Other(1)	4		—		4		—		—		—
Ending balance	$	137	$	10	$	147	$	104	$	6	$	110

(1) Includes amounts related to foreign currency remeasurement.

The allowance for credit losses at June 30, 2025 for our merchant receivable portfolio was $147 million, an increase from $113 million at December 31, 2024. The increase in allowance for credit losses was related to a decline in credit quality of merchant loans outstanding primarily from modifications in acceptable risk parameters in 2024, which included broadened eligibility. In the second quarter of 2025, we updated our expected credit loss model for all portfolios to utilize multiple economic scenarios rather than the single scenario previously utilized. These changes did not have a material impact on our allowance for credit losses in the period.

PayPal Holdings, Inc. 10-Q