There are a lot of personal loan company in the market today, and they each focus on different types of personal loan. For payoff personal loan, it eliminates high-interest credit card debt.

These loans are designed for consumers with good credit — meaning you should not have any current delinquencies when you apply and no delinquencies greater than 90 days within the past 12 months.

But before deciding whether to apply for payoff personal loan, we always recommend that you make your own market research to find out the personal loan that matches your personality. Here are the things you need to know about payoff and it personal loan package

• Who is Payoff Inc.
• Is Payoff a Good Loan Company?
• Pros and Cons of Payoff Personal Loans
• How to apply for a Payoff Personal Loan
• Payoff Personal Loan Eligibility Criteria
• Does Payoff Hurt Your Credit
• Can You Pay off a Payoff Loan Early?
• What Credit Score do You Need For Payoff Loan
• Why Credit Score Drops When You Pay Off a Loan
• How to Pay Off Debt and Help Your Credit Score
• How to Keep Your Credit Score From Dropping
• How Fast Does Your Credit Score go up After Paying Debt
• What is Debt Consolidation
• How Debt Consolidation Works
• What is The Smartest Way to Consolidate Debt
• What Are The Risks of Debt Consolidation

Who is Payoff Inc.

Payoff, Inc., previously known as Payoff.com, is a Costa Mesa, California-based financial services company that offers loans to customers for paying off their credit card debt Offering fixed-rate loans through a peer-to-peer lending platform, the company lends money to credit-worthy credit card debt holders.

• Payoff Loan – The company’s primary offering is the Payoff Loan. Clients apply on the Payoff.com website, and if the client is approved, funds are electronically transferred to the client’s bank account.

• Lift – Lift is a program designed to enhance the credit profiles of borrowers who are rejected for Payoff loans. The company integrates behavioral science techniques into tools and training designed to help clients get out of debt.
• Payoff Living Blog – Payoff also publishes tips and techniques for helping clients get out of debt and make the most of their money

Is Payoff a Good Loan Company?

As we mentioned earlier, payoff personal loan helps to eliminate credit card debts. Below are some people that might find payoff personal loan more beneficial.

Payoff is a great option for people with a good credit history who are paying a lot of interest on credit card debt. Payoff can also be helpful for individuals who have multiple credit card payments each month, as consolidating these debts will result in a single, easy-to-track monthly payment.

Also, Payoff is a great choice for people looking to avoid fees and build their credit while consolidating high-interest credit card debt. That’s because in general, the higher your credit score, the lower your interest rate, and Payoff does provide a significant cost savings if you can qualify for its low rates.

Payoff has no other fees. They don’t charge you for paying off your loan ahead of schedule, and they don’t charge a fee for late payments. But as late payments will damage your credit, it’s a good idea to always pay on time. Payoff offers plenty of time to pay loans off, too, giving borrowers 24 to 60 months.

Pros and Cons of Payoff Personal Loans

Before applying for a Payoff personal loan, consider the benefits and drawbacks of the lender.

Pros:

• Financial tools: Payoff offers “personality, stress, and cash flow assessments” to help you better manage your finance and debt, as well as first-year quarterly check-ins to address any questions or concerns.
• Few fees: If you miss a payment, a late fee won’t be applied, and you can speak with a Payoff representative to discuss deferring payment, skipping a payment or changing a payment date. Payoff also does not charge application fees or prepayment fees.

Cons:

• Slower funding than competitors: While you’ll likely receive funds in two to five business days, Payoff’s funding timeline is still slower than that of many of its competitors. Many online lenders boast funding in as little as one day after approval.
• Origination fee: Payoff charges a one-time upfront origination fee of up to 5 percent, which is taken out of your loan proceeds.
• Limited loan usage: Payoff loans are designed for consolidating credit card debt, so they’re not a good option if you’re hoping to borrow money for home improvements or emergency expenses.

How to apply for a Payoff Personal Loan

Payoff’s application process is straightforward and fast. Enter basic information, including your name, address and income. You’ll also be asked how much your monthly housing costs are, if any.

Payoff will conduct a “soft” credit check, which won’t impact your credit rating. Then it’ll tell you how much it suggests you borrow to pay off your credit card debt. You can sort through loan offers by monthly payment amounts or by APR.

If you select one of the displayed offers, Payoff will direct you to a more detailed application, where you’ll have to provide your employment information, Social Security number and bank account information. You’ll also have to upload two recent pay stubs, a copy of your ID and a recent bank statement.

Before finalizing your loan, Payoff, like all lenders, will do a “hard” credit check, which can adversely impact your credit score.

Would-be borrowers must meet Payoff’s eligibility requirements, which include:

• A minimum credit score of 640.
• A debt-to-income ratio of 50 percent or less.
• At least three years of good credit history.
• At least two open lines of credit on which you’ve made on-time payments.
• No current delinquencies and no delinquencies greater than 90 days within the last 12 months.

Payoff Personal Loan Eligibility Criteria

In order to be eligible for a Payoff loan, you must meet the following criteria:

• Credit score of 640 or higher
• Debt-to-income ratio under 51%
• 3 years of credit history with at least 2 current accounts in good standing
• No more than one installment loan in last 12 months
• No current delinquencies
• No delinquencies greater than 90 days in the last 12 months

Meeting these requirements does not guarantee that you will be approved for a loan, but these are the basic criteria that you need to meet to even be considered.

Does Payoff Hurt Your Credit

Checking your Payoff Loan rate will not hurt your credit. Right before you finalize your Payoff Loan, they run a hard inquiry, which can impact your credit. But good news, their members see an average FICO^® Score increase of 40 points.

Can You Pay off a Payoff Loan Early?

Yes you can, and with absolutely no penalties.

If you are interested in paying off your loan in full, simply reach out to them so that they can get you all the most up-to-date information on your Payoff Loan. You can send an email directly to their payments team for more information at payments@payoff.com.

Does Payoff Verify Income

Payoff may need to verify your income. The easiest way to do this is to provide your 2 most recent paystubs. They strongly prefer that you submit these paystubs in electronic PDF format.

If you expect to be paid within the next week, payoff may ask that you provide this paystub in addition to the above. You may upload this paystub at a later time by logging back into the website.

What Credit Score do You Need For Payoff Loan

To be eligible for a Payoff loan, you will need a minimum FICO credit score of 660 and a debt-to-income ratio of 50% or less. You will need at least three years of credit history and two current credit accounts in good standing (i.e., credit cards, mortgages, installment loans, etc.).

You cannot have any current delinquencies, and you cannot have had any delinquencies greater than 90 days in the last 12 months. If you meet these requirements, you will be eligible for a Payoff loan.

How Does it Take to Get Money From Payoff

The approval process can take three to five days, depending on what documents the company needs. If you’re approved, it’ll take another three to five days to deposit the money into your account, which Payoff expects you to use to pay off your credit card debt.

Why Credit Score Drops When You Pay Off a Loan

A big influence on your credit score is credit utilization — the percentage of your credit limit that you are currently using. That scoring factor is one reason your credit score could drop a little after you pay off debt. Having low credit utilization (30% or less and the lower the better) is good; having no credit utilization may be harmful to your score.

Some of the other factors that affect your credit score also could come into play. Paying off an installment loan, like a car loan or student loan, can help your finances but might ding your score. That’s because it typically results in fewer accounts. (That’s not a reason not to do it! Don’t stretch out a loan and pay more in interest just to save some credit score points.)

Age of your credit accounts, whether you’ve recently applied for credit and what kinds of credit you have also can affect your score.

How to Pay Off Debt and Help Your Credit Score

If you focus on credit card debt first, it can help your budget (cards tend to have higher interest rates than installment loans) and your score too (if you lower your credit utilization).

Credit utilization is calculated both on a per-card and overall basis. If you have any credit cards that are charged up to anywhere close to their limits, make it a priority to lower your balance(s) to no more than 30% of your limit — and lower is better.

Here are other habits to keep in mind:

• Pay on time, every time. Late payments can seriously damage credit.
• Keep credit cards open. That is, unless you have a compelling reason for closing them, such as an annual fee or poor customer service. When you close an account, it can reduce your average account age. It also cuts your available credit, which sends utilization up.
• Use credit lightly. If you no longer love the card, consider putting a small, recurring charge on it, and putting it on autopay so that the issuer won’t close the card because of inactivity.

How to Keep Your Credit Score From Dropping

Once you’ve gotten your balances to zero, here’s how to guard your credit.

Make it easier to pay on time. Set up reminders to pay bills. You can set up calendar reminders, or get emails or text alerts from most issuers.

Watch for credit report errors. Any attempt to build your credit will be fruitless if the data going into your scores is wrong.

You can get free credit report information two ways: Some personal finance websites, including NerdWallet, offer report information on demand. And once a year you’re entitled to a free report directly from each of the three credit bureaus.

The reports you can get annually from the credit bureaus can run to dozens of pages.

If you see an error, dispute it. Someone else’s file mixed up with yours or identity theft could potentially — and unfairly — hurt your score, and the sooner you address that, the better.

Don’t apply for multiple credit products in a short time. Opening new credit lowers the average age of your credit accounts and involves a “hard inquiry,” which can result in a small, temporary drop in your score. If you can, wait at least six months between credit applications.

Practice patience. Sometimes the best thing you can do for your credit is wait. A combination of patience and good habits will help any credit score bounce back. Most credit missteps fall off your credit records in seven years.

How Fast Does Your Credit Score go up After Paying Debt

Unfortunately, there’s no way to predict how soon your credit score will go up or by how much. We do know that it will take at least the amount of time it takes the business to update your credit report. Some businesses send credit report updates daily, others monthly. It can take up to several weeks for a change to appear on your credit report.

Once your credit report is updated with positive information, there’s no guarantee your credit score will go up right away or that it will increase enough to make a difference with an application. Your credit score could remain the same—or you could even see your credit score decrease—depending on the significance of the change and the other information on your credit report.

The only thing you can do is watch your credit score to see how it changes and continue making the right credit moves.

What Affects Credit Score Update Timing?

The timing of credit score updates is based on the timing of changes to your credit report. Since your credit score is calculated instantly using the information on your credit report at a given point in time, all it takes to raise your credit score is a positive change to your credit report information.

At the same time, having negative information added to your credit report can offset positive changes you might have seen to your credit score. For example, if you receive a credit limit increase (therefore lowering your credit utilization) but a late payment is also added to your credit report, you may not see your credit score improve. In fact, your credit score could fall.

Seriously negative information can weigh your credit score down, making it take longer to improve your credit score. For example, it can take longer to improve your credit score if you have a bankruptcy, debt collections, repossession, or foreclosure on your credit report. The more recent these items are, the more they will impact your credit score.

What is Debt Consolidation

Debt consolidation refers to the act of taking out a new loan to pay off other liabilities and consumer debts, generally unsecured ones. Multiple debts are combined into a single, larger piece of debt, usually with more favorable payoff terms.

Favorable payoff terms include a lower interest rate, lower monthly payment, or both. Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt, and other liabilities.

How Debt Consolidation Works

As noted above, debt consolidation is the process of using different forms of financing to pay off other debts and liabilities. So when a consumer is saddled with different kinds of debt, they can apply for a loan to consolidate those debts into a single liability and pay them off. Payments are then made to the new debt until it is paid off in full.

Most consumers apply through their bank, credit union, or credit card company about a debt consolidation loan as their first step. It’s a great place to start, especially if you have a great relationship and payment history with your institution. If you’re turned down, try exploring private mortgage companies or lenders.

Creditors are willing to do this for several reasons. Debt consolidation maximizes the likelihood of collecting from a debtor. These loans are usually offered by financial institutions such as banks and credit unions, but there are other specialized debt consolidation service companies that provide these services to the general public.

An important point to note is that debt consolidation loans don’t erase the original debt. Instead, they simply transfer a consumer’s loans to a different lender or type of loan. For actual debt relief or for those who don’t qualify for loans, it may be best to look into a debt settlement rather than, or in conjunction with, a debt consolidation loan.

Debt settlement aims to reduce a consumer’s obligations rather than the number of creditors. Consumers work with debt-relief organizations or credit counseling services. These organizations do not make actual loans but try to renegotiate the borrower’s current debts with creditors.

Types of Debt Consolidation

There are two broad types of debt consolidation loans: secured and unsecured loans. Secured loans are backed by one of the borrower’s assets such as a house or a car. The asset, in turn, works as collateral for the loan.

Unsecured loans, on the other hand, are not backed by assets and can be more difficult to obtain. They also tend to have higher interest rates and lower qualifying amounts. With either type of loan, interest rates are still typically lower than the rates charged on credit cards. And in most cases, the rates are fixed, so they do not vary over the repayment period.

There are several ways you can lump your debts together by consolidating them into a single payment. Below are a few of the most common.

Debt Consolidation Loans

Many creditors—traditional banks and peer-to-peer lenders—offer debt consolidation loans as part of a payment plan to borrowers who have difficulty managing the number or size of their outstanding debts. These are designed specifically for consumers who want to pay down multiple, high-interest debt.

Credit Cards

Another method is to consolidate all your credit card payments into a new credit card. This new card can be a good idea if it charges little or no interest for a set period of time. You may also use an existing credit card’s balance transfer feature—especially if it offers a special promotion on the transaction.

HELOCs

Home equity loans or home equity lines of credit (HELOC) are another form of consolidation. Usually, the interest for this type of loan is deductible for taxpayers who itemize their deductions.

Student Loan Programs

There also are several consolidation options available from the federal government for people with student loans. The federal government offers direct consolidation loans through the Federal Direct Loan Program. The new interest rate is the weighted average of the previous loans. Private loans don’t qualify for this program, however.

What is The Smartest Way to Consolidate Debt

Debt consolidation is sometimes the only way to escape financial quicksand without facing bankruptcy, but it requires serious commitment and often a major change in lifestyle.

If you decide that consolidating makes sense, you’ll need a strategy. The first step in any plan is figuring out how much you owe and what sort of debt it is. Is it all credit card debt or do you also owe money on a house, car or personal loan?

If it’s a mixture, break down your debt into secured and unsecured categories. That’s important because secured debt is attached to something you own. If you own a house, failure to make payments can lead to foreclosure. If you owe money on a car and don’t pay, the lender will repossess the vehicle.

Unsecured debt — what you owe on credit cards, personal loans and student loans – doesn’t use collateral so there is nothing for the lender to take back. They might, however, sue and try to garnish your wages if you default.

The downside of unsecured debt is the interest rate. A loan without collateral represents a bigger risk to lenders than one with collateral, so the interest rate is almost always higher.

There are five main ways to consolidate unsecured debt, and only one uses a collateralized loan.

1. Arrange a debt management payment plan through a nonprofit credit counseling agency
2. Transfer unpaid balances to a single credit card with a lower interest rate
3. Take out a personal loan
4. Use a home equity loan or a home equity line of credit (HELOC) to pay off your creditors, effectively transferring your balance to a lower interest loan, but one that uses your house as collateral.
5. Borrow from a retirement savings plan like a 401(k) or a Roth IRA.

Your approach will hinge on your creditworthiness. Your FICO score, the number credit rating agencies assign to your finances, is important in determining if you can get a loan or a credit line large enough to consolidate your debts at an interest rate that makes sense.

Every strategy requires that you have the income to cover the monthly payment and all your other expenses. If you miss a payment, the deal could easily unravel. If you use a home equity loan or HELOC, you might even face foreclosure.

Is it Worth Getting a Personal Loan to Consolidate Debt?

Combining multiple types of debt – such as credit card and store card balances, loans, overdrafts, and payday loans – into a single monthly payment can make it easier to manage your finances and potentially save you a decent sum of money too.

One way to do this is to use a personal loan. The amount borrowed through the loan can be used to pay off your existing debts, and you’ll then repay your new lender in monthly instalments, ideally at a lower rate of interest.

This means you’ll only have one payment to make each month, rather than several, and only one lender to deal with.

What Are The Risks of Debt Consolidation

To make sure debt consolidation doesn’t make your situation worse, it’s important to understand the dangers so you can make an informed choice about whether consolidating your outstanding debt makes sense for you.  Here are four major risks associated with the process that you’ll want to mitigate if you plan to take this approach.

1. Going deeper into debt

One of the biggest risks of consolidating debt is that you’ll apply for new credit without solving spending problems that caused you to get into debt in the first place.

If you take out a personal loan or get a balance transfer card to repay existing debt, you’ll now have lots of available credit on the cards you transferred the balances from. If you turn around and start charging on those cards, they could soon have high balances again — and you’ll also owe on your consolidation loan.

To avoid making this mistake, don’t consolidate debt until you have a plan to avoid overspending. Make up a budget you’ll live on, ideally start saving towards an emergency fund, and vow not to use your newly freed up cards for any purchases.

2. Paying more in interest

One of the biggest benefits of debt consolidation loans is that you can lower your interest rate. A personal loan or a balance transfer credit card offering 0% interest for a limited time period can all carry far lower interest rates than existing credit card debt. But, your interest rate isn’t the only factor in how much interest you’ll pay.

Your timeline for debt repayment also plays a big role in the total interest cost you’ll incur. If you take out a debt consolidation loan and lower your monthly payments by stretching out your repayment period, your interest rate may be lower but your total costs higher since you’re paying interest over such a long period of time.  

Say you owed $2,000 on a credit card at 15% interest and $3,000 on a card at 20% interest and were paying $200 a month to each card. Your debt would be paid off in 1.5 years (18 months) and you’d pay a total of $629 in interest. But, if you took a 36-month consolidation loan at 9.24% and took the full time to repay the loan, your monthly payments would drop from the $400 you were paying to $159.56.

Sounds good, but the problem is, even at the lower interest rate, your total interest cost would be much higher. That’s because you’d pay interest for the 36 months it took to repay the personal loan, rather than for 1.5 years. You’d pay a total of $744 in interest, which is $115 more.

You could avoid this problem by continuing to make the same monthly payment — or a higher one — on the new loan used to consolidate debt. Just make sure you don’t have a prepayment penalty on the consolidation loan.

3. Getting caught up in a consolidation scam

Some lenders specifically market debt consolidation loans to consumers who are struggling financially. Unfortunately, many of these loans aren’t very consumer friendly. Interest charges may be very high, the loan terms may be very long, or there may be other unfavorable terms such as exorbitant penalties for a single missed payment.

You don’t want to get caught up in debt consolidation scams, so research loans and lenders carefully. Compare interest rates, terms, and total loan costs and check for complaints about the lender you’re working with. The Consumer Financial Protection Bureau has a helpful database of consumer complaints to use.  

Or, just stay away from these “debt consolidation lenders,” and opt for a standard personal loan or balance transfer credit card instead and you won’t have to worry about this problem.

4. Putting your home or retirement at risk

There are different ways to consolidate debt, including personal loans and balance transfers — both of which can be great options to reduce your rates without taking on a lot of additional risk.

But, some borrowers will take home equity loans out to repay existing debt, or will borrow from a 401(k). Doing either of these things can be very risky because if you don’t pay your loan, you’ll put your home in jeopardy or get hit with a 10% penalty plus owe income tax on money withdrawn from your retirement account.

While it may seem attractive to pay a very low interest rate with a home equity loan or to pay interest to yourself with a 401(k) loan, you should think very carefully about converting unsecured credit card debt — which doesn’t have any collateral attached to it — to one of these loans that carries such big risk

Conclusion

Payoff may be a good option if you have good to excellent credit and you’re eager to pay off high-interest credit card debt. The company offers competitive APRs, which include the origination fee, and does not charge other fees. It also provides proactive customer support during the first year of the loan.

You should always shop around before applying for a personal loan, though. With good to excellent credit, you may qualify for several other personal loan options. The difference in APRs and fees could have a big impact on your bottom line.