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Payoff, by Happy Money, is an online lender that offers personal loans with a specific goal: to help you pay off your credit cards. Its loans, which are essentially debt consolidation loans, can help you bump down your debt payments, lock in a fixed, lower interest rate, and boost your overall financial wellness. Based in Tustin, Calif., and founded in 2009, Payoff offers credit card debt consolidation in 48 states and the District of Columbia. Not a bank itself, Payoff works with lending partners who originate the loans. If you have fair or good credit, you can consolidate your credit card debt with a debt consolidation loan of up to $40,000.
If you’re looking to use a personal loan to consolidate debt, make sure you’re getting an equal or lower interest rate than your existing debt, otherwise you won’t save any money. Many lenders will let you check your rate without a formal application, making it easy to compare personal loan rates to find the best deal.
Payoff puts a big focus on debt consolidation and improving credit, and offers some benefits focused around that theme, such as monthly FICO score updates to help borrowers track and monitor their credit. Payoff’s APRs are mid-range for the category, but it does charge an origination fee of up to 5% of the loan amount. Relatively lenient credit score requirements and the lack of a hard income requirement make Payoff an accessible option for many, but since Payoff loans are limited to debt consolidation, they may not be the best option for borrowers who need a personal loan for other purposes. Payoff isn’t available in Nevada and Massachusetts, so residents of those states will need to look elsewhere.
What to Know Before Getting a Personal Loan
Personal loans can be an attractive option to lean into for financing for a handful of reasons. They’re flexible in their use, and can typically be used for anything from home improvement projects to paying off medical bills to debt consolidation. They can also be used to boost cash flow.
Another draw of personal loans is that they’re typically unsecured, meaning you don’t have to back the loan with collateral, such as your home or car. With secured loans, on the other hand, you’ll need to offer a valuable asset. Another advantage of a personal loan is that they typically have fixed interest rates, so the amount you’re paying in interest doesn’t change over time. Credit cards, on the other hand, typically have variable interest rates that can change monthly.
However, there are a few drawbacks. For one, while the interest rate of an unsecured personal loan might be lower than that of credit cards, they usually are more expensive than secured loans, such as a home equity line of credit (HELOC). That’s because they aren’t backed by collateral and are deemed as a higher risk. Plus the credit and income requirements might be higher.
Alternatives to Personal Loans
- Balance transfer credit card: A credit card could be a solid alternative to a personal loan if you’re looking to consolidate debt. Balance transfer credit cards have introductory promo offers of 0% APR for a given amount of time, anywhere from 6-18 months. If you use a balance transfer card, be sure to pay off the balance before the end of the introductory period, otherwise you’ll be stuck paying a high interest rate on the remaining balance. Balance transfer cards usually charge a balance transfer fee, which is a percentage of the amount you’re transferring. Plus, these cards are usually only accessible to those with solid credit.
- Debt management plan: A debt management plan (DMP) is typically offered by credit counseling agencies. A counselor from the agency will work with you on coming up with a debt management plan. They’ll also reach out to each credit card issuer and see if your monthly payment, interest rate, or fees can be lowered. You’ll also only need to make a single payment. These plans may come with a monthly fee or upfront charge. Given the prevalence of scams in the debt relief industry, be sure to carefully vet any agency you work with.
- Personal savings: If you can find ways to “free up” money by lowering your expenses, or by bringing in more money by way of a side hustle, work promotion or bonus, you could put some of your savings toward your credit card debt. However, you won’t want to sacrifice your emergency fund toward debt repayment. A general rule of thumb is to have three to six months’ worth of expenses stashed in a rainy day fund.
- Credit counseling: If paying off your debt remains a struggle, non-profit organizations typically offer free or low-cost credit counseling to help you improve your finances. While credit counseling services won’t offer loans or money, they can provide expert guidance, help create a custom plan, and point you toward other useful resources.
- HELOCs, home equity loans, and cash-out refinance loans: If you own a home and have built up equity, one option is to borrow against that equity using your home as collateral to help pay off debts.
Pros and Cons of Payoff
No fees on late payments, prepayment penalties, or returned check or processing fees
Soft credit pull when getting preapproved and a loan rate
Free monthly credit update
Free financial assessment tools
Loan amounts up to $40,000
Not available to residents of Nevada and Massachusetts
Funding typically takes two to five business days after application has been approved
Possible origination fee between 0% and 5%
Payoff Compared to Other Lenders
|Current APR||5.99% to 24.99%||5.99% to 35.99%||4.99% to 19.63% (with 0.25% autopay discount)|
|Loan Term Range||2 to 5 years||3 to 5 years||2 to 7 years|
|Loan Amount||$5,000 to $40,000 (Minimum loan amount is $5,100 in New Mexico and $6,100 in Maryland)||$2,000 to $50,000||$5,000 to $100,000|
|Credit Score Needed||600||Not specified||680|
|Origination Fee||0% to 5%||0.99% to 5.99% of the loan amount||None|
|Unsecured or Secured Debt||Unsecured||Both||Unsecured|
The above rates and loan information are accurate as of September 7, 2021. The NextAdvisor editorial team updates this information regularly, though it is possible APRs and other information has changed since it was last updated. Some of the lowest advertised rates might be for secured loans, which require collateral such as your home, car, or other asset. Also, some loan offerings may be specific to where you live.
How to Qualify for a Payoff Loan
To apply for a Payoff personal loan, you’ll need to:
- Be at least 18 years of age
- Have a valid checking account
- Have a valid social security number
Payoff loans are not available in Massachusetts and Nevada.
To qualify for a loan, you’ll need a FICO credit score of at least 600, which is considered “fair” by credit bureau Experian. Your credit score is one criteria Payoff’s partners will look at to determine your APR. You’ll also need at least 3 years of credit history. Other factors that may affect your loan approval include the loan term and loan amount you’re seeking, the state you live in, whether you have any delinquencies on your credit report, your credit usage, and your credit history.
Payoff doesn’t have any income requirements, but Payoff may look at your debt-to-income ratio when evaluating your application.
Who Should Get a Payoff Loan
Payoff loans are meant for one specific purpose: debt consolidation. If you’re looking to consolidate credit card debt and want to simplify your payments, lock in a lower interest rate, or lower your monthly payments, Payoff could be a good fit. But if you want to use a personal loan for other purposes — such as home improvements, financing a big purchase, or covering emergency expenses — Payoff might not be the right lender for you.
While you only need a credit score of 600, Payoff also looks at other aspects of your credit picture, such as your credit use, credit history, and debt-to-income ratio. Those with lower credit scores and a bumpy credit history could still secure a Payoff loan, but the interest rates might be on the high end.
How to Apply for a Payoff Loan
1. Figure out your ideal loan amount and terms
First, look at how much credit card debt you want to consolidate and your desired timeline for paying it off to find what loan amounts and terms will work for you. You can use a loan calculator to calculate your expected monthly payment and overall costs with different interest rates and loan terms.
2. Get pre-approved
You can check your rate by getting preapproved online through Payoff’s website. If you have the required information on hand, you could get a rate within minutes. Similar to other online applications to get preapproved for a personal loan, you’ll need to provide basic personal information, your Social Security number, and individual gross income. Checking your rate in this way will result in a soft credit pull, which won’t impact your credit score.
3. Officially submit your application
Once you’ve decided you’d like to consolidate your credit cards through Payoff, you can officially submit your application. A hard pull will be done on your credit profile, which might lower your credit score by a few points.
4. Wait for approval
Payoff partners with third-party lenders who originate the loan. Before the loan gets approved, you might need to supply additional information or documents for verification. This could include bank credentials to link your Payoff loan to a checking account and a government-issued form of ID. To verify your income, you’ll also need to provide two recent paystubs. Self-employed applicants will need to show tax returns.
It typically takes anywhere from 2 to 5 business days after your application has been approved and verified for the funds to be deposited into your bank account.
Is Payoff good for personal loans?
A Payoff loan could be a solid choice if you’re looking to consolidate your credit card debt. When you consolidate your credit card debt, you roll multiple credit card balances to a single, new loan with a new, fixed interest rate. In turn, you’ll only need to make a single payment. Plus, you might be able to lock in a lower interest rate and lower your monthly payments. If you have a strong credit score and credit history, it could be a good option for you.
What credit score do you need for a Payoff loan?
You’ll need at least a FICO score of 600 to qualify for a Payoff loan. To get the best rates and terms, you’ll need a stronger credit score and history.
Can I get a Payoff personal loan with bad credit?
A credit score of 600 is considered to be in the “fair” range, according to credit bureau Experian. This means you don’t need perfect credit to qualify for a Payoff loan, but those with truly poor credit (a FICO score of 580 or lower) may have better luck with a lender that specializes in bad-credit loans.
Does a Payoff loan hurt your credit?
Applying online to get preapproved for a rate results in a soft pull of your credit. This step of the process won’t affect your credit score. After you decide to actually apply and before the loan is finalized, Payoff’s lending partners will do a hard pull, which could impact your credit score. Once you have the loan, making consistent and on-time payments can improve your credit score, while late or missing payments can seriously hurt your credit score.