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Personal Loans

Payoff Personal Loan Review

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Payoff
APR

8.00%
To
25.00%

Credit Req.

640

Minimum Credit Score

Terms

24 to 60

months

Fees

2.00% - 5.00%

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on LendingTree’s secure website

The entire goal of Payoff is to help you pay down your debt and they typically don’t like being described as a loan company. They offer a quick, easy, and digital process for getting a personal loan and consolidating your credit card debt. If you have poor credit, little credit, or are continuing to take on more debt every month, you will find it difficult to get approved.

Payoff personal loan details
 

Fees and penalties

  • Terms: 24 to 60 months
  • APR Range: 8.00%-25.00%
  • Loan amounts:$5,000-$35,000
  • Time to Funding: Most loans are funded within 2-6 business days after the verification process is completed
  • Hard pull/soft pull:
  • Origination fee: 2% for 24-month loan, 3% for 36-month loan, 4% for 48-month loan, 5% for 60-month loan
  • Prepayment fee: None
  • Late payment fee: None
  • Other fees: None

Payoff aims for fee transparency: The only fee associated with a Payoff loan is the origination fee.

Payoff members receive other benefits, including:

  • Free monthly FICO® score updates
  • Job loss support
  • Quarterly check-in calls from Payoff’s member experience team during your first year
  • Tools that assess your personality, stress and cash flow to help you better understand yourself and your financial habits

Eligibility requirements

  • Minimum credit score: 640
  • Minimum credit history: 3 years of good credit
  • Maximum debt-to-income ratio: 50%

Payoff requires that you have at least two open and satisfactory tradelines on your credit report (i.e. open lines of credit on which you’ve made on-time payments). Any delinquencies (past-due payments) must be resolved before applying for a Payoff loan. You must also have not opened a personal installment loan within the past 12 months.

Payoff loans are not yet available in Massachusetts, Mississippi, Nebraska, Nevada, Ohio and West Virginia. Additionally, candidates must apply as individuals — there are no joint applications for spouses.

Payoff loans are intended to help eliminate credit card debt. In some instances, Payoff can help customers consolidate prior installment loans, including student loans. Contact Payoff to discuss your personal debt situation.

Applying for a personal loan from Payoff

To begin the Payoff loan application process, you can visit the website and enter some initial personal financial information to get a feel for the types of rates you may be eligible for. You can also review the terms of different loan packages and select one that best meets your needs.

If you’ve decided to move forward with a Payoff loan, you will be asked to complete the online application process and upload multiple documents. The documents required will differ based on the individual. They generally include:

  • Proof of identification, such as a current driver’s license or passport
  • Proof of income, usually your two most recent pay stubs. (If you are self-employed or can’t provide pay stubs, you may be asked to provide tax documents like Form 1040, Schedule C and/or K-1.)
  • Other financial documentation, including your most recent monthly bank statement and mortgage statement

Payoff recommends assembling all of your documents in advance of your online application, because a partial submission will slow the process. Once you’ve uploaded your documents and attached them to your application online, you may log in anytime to check the status. If Payoff needs further documentation or clarification, someone from the company will contact you. Though the application process is done completely online, there is a toll-free number you can call with questions along the way.

It typically takes three to seven business days after your completed application has been received for it to be reviewed. A Member Advocate will reach out either way to let you know if your application is accepted or declined. If you are declined, you can apply elsewhere or try again after 30 days. If you are accepted, your loan will fund within two to six business days. Payoff does a hard credit check just before your loan is finalized.

Pros and cons of a Payoff personal loan

As with any financial decision, there are benefits and drawbacks to a Payoff loan.

Pros:

Cons:

  • Payoff provides customers with a variety of support services addressing not only the financial but emotional and psychological aspects of debt
  • With just an upfront origination fee and no other fees, Payoff customers don’t have to worry about penalties or unexpected charges popping up
  • Payoff’s APR is on par with competitive loan offerings — you won’t get significantly lower rates here
  • If you don’t have good credit or 3+ years of credit history, a Payoff loan is not even an option

Who’s the best fit for a Payoff personal loan

Payoff is a great option for people with a good credit history who are paying a lot of interest on credit card debt. Consolidating credit card debt with a personal loan can often result in lower overall interest payments. 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. Payoff’s quarterly check-in calls during the first year may be especially helpful for individuals who need help staying on track as they start paying off debt.

Alternative personal loan options

Lending Club

LendingClub is an online peer-to-peer lending marketplace for personal loans, auto refinancing, and business loans. Though Lendingclub’s offerings are generally competitive, its funding time is longer than most lenders in the space (can take a week) and its origination fee is a bit higher.

LendingClub
APR

6.16%
To
35.89%

Credit Req.

600

Minimum Credit Score

Terms

36 or 60

months

Fees

1.00% - 6.00%

LEARN MORE Secured

on LendingTree’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores as low as 600.... Read More

Earnest

Earnest is an alternative lender that offers personal loans, student loan refinancing and home loans. The company boasts that it gives customers lower rates by using nontraditional financial data such as savings patterns, investments and career trajectory when considering applications. Earnest loans have no fees and are ideal for young professionals with a degree and steady employment who have not yet built a robust credit history.

Earnest
APR

5.49%
To
18.24%

Credit Req.

660

Minimum Credit Score

Terms

36 to 60

months

Fees

No origination fee

LEARN MORE Secured

on LendingTree’s secure website

Instead of offering credit-based loans, Earnest has taken a very nontraditional approach using a merit-based system.... Read More

Upstart

In addition to traditional qualifiers like a FICO score, Upstart also considers your education, area of study and job history when reviewing your loan application. The company says once you are approved, your loan can be funded the next day. Upstart also claims its borrowers save 23% on refinanced credit card debt. Upstart loans are subject to a number of fees, including an origination fee, late fees and check processing fees. The lender is a good fit for young adults with a good credit score but a short credit history who want to pay off debt.

Upstart
APR

7.80%
To
29.99%

Credit Req.

640

Minimum Credit Score

Terms

36 to 60

months

Fees

0.00% - 8.00%

LEARN MORE Secured

on LendingTree’s secure website

Upstart’s initial focus was to help recent graduates that were struggling with debt, but they have expanded to provide options for those with strong credit profiles as well. They have a unique algorithm that takes into account things such as education, career, job history, and standardized test scores, but you will still need a minimum FICO score of 640.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Ashley Sweren
Ashley Sweren |

Ashley Sweren is a writer at MagnifyMoney. You can email Ashley here

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Pay Down My Debt

What Is Debt Consolidation & How Does it Work?

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Dealing with multiple personal debts might feel a lot like playing whack-a-mole – different bills with different due dates, minimum balances and late fines and penalties. Just when you’ve sent in one payment, another bill pops up. It’s easy to see how people get behind when repaying multiple debts overwhelms them. Debt consolidation can help by essentially rolling all your debt payments, like credit card bills, into one with a single due date and a fixed interest rate that is typically lower, depending on your credit score. Sounds easy right? While debt consolidation does provide a bevy of benefits, it does have its pitfalls if one isn’t careful. But don’t fret, we here at MagnifyMoney got your back! Continue reading our guide on consolidating debt to learn the in’s and out’s of debt consolidation!

Debt Consolidation: Understanding the Basics

As stated above, a key component to debt consolidation is rolling all monthly payments into one. There are two primary ways to concentrate debt payments into one bill: transferring the debt to a 0% balance transfer credit card, or a debt consolidation loan. Your credit score is a big determining factor as to which of the two options you should choose. If you have a credit score of 700 or higher it’s probably better to consider a balance transfer credit card. We will talk move about balance transfers further down. If you have a credit score below 700, which is common with someone dealing with a good amount of credit card debt, a debt consolidation loan is right up your alley. Let’s jump into learning exactly what a debt consolidation loan really is!

Looking to increase your credit score so you can qualify for a balance transfer credit card? 6 simple steps to improve your credit score!

What is a debt consolidation loan?

A debt consolidation loan is any type of loan that is used to pay off all existing debts, which allows you to focus on just paying one monthly payment opposed to several. (More about this in the section below!) In many cases, debt consolidation loans offer lower interest rates and extended terms compared with your current payments. People typically choose to consolidate debt to simplify their finances or to save money on interest payments. Borrower beware: Upfront fees or temporary terms could eat into that savings. Make sure to read the fine print before committing to your debt consolidation loan! Plus, consolidating debt without a plan to address the behavior that got you into financial trouble in the first place may actually exacerbate your debt if new lines of credit tempt you to start spending again.

How debt consolidation works

When you obtain a debt consolidation loan, you receive a lump sum to pay off your existing debts. Then, instead of juggling multiple payments, you can focus on making the one new loan payment. “You essentially take multiple loans that might be causing confusion with different interest rates and different terms, and roll them into a single loan, which leaves you with one single payment needing to be made,” said Todd R. Tresidder, money coach at FinancialMentor.com. Debt consolidation works best when you have a credit score that allows you to qualify for a loan with interest rates lower than what you’re currently paying. The higher your credit score, the better debt consolidation can work for you.

— If you are dealing with average or poor credit, and want to consolidate your debt.

View our list of debt consolidation loans for fair credit or our list of debt consolidation loans for bad credit

What types of debt can I consolidate?

Debt consolidation can be used to simplify almost any type of unsecured consumer debt. This includes:

“Though debt consolidation is most often used for credit cards, there’s not a boundary line. You could consolidate pretty much any type of loan that you have,” Tresidder said.

Which loans can be used to consolidate debt?

Based on LendingTree data (our parent company), personal loans are the most popular option for debt consolidation, but a home equity loan or HELOC work as well. There are companies that specialize in debt consolidation loans, or you may choose to work with your preferred local bank or credit union. To make it easier for you, we’ve compiled a list of the best personal loans for debt consolidation.

One caveat: You will need good credit to ensure you’re able to obtain a loan with better rates and terms than your existing debt.

Note: If you have a credit score less than 640, struggling to make monthly debt payments and would like to explore your options to reduce your debt by up to 50%, then please click our option below to customize a personal debt relief plan.

Custom Debt Relief Plan

Depending on your unique needs and situation, there are different loan products that can help you consolidate and streamline your debt payments. View our guide on choosing the right debt consolidation method to get a better understanding of the options available for you.

Where can I find the best debt consolidation loans?

Since achieving a lower interest rate and better terms are imperative when consolidating debt, comparing offers is essential. Since this will require that the lender do a credit check, be sure to get all your shopping done within 45 days. Multiple hard credit pulls outside of that time window can be damaging to your FICO credit score.

Online lending marketplaces such as LendingTree simplify the process by enabling you to see offers from multiple lenders. Local financial institutions are another place to start shopping for debt consolidation loans. “The familiar is good if you have a credit union or a trusted bank. Start there just as your comparison point before you start looking at … companies online,” Dlugozima said.

LendingTree
APR

5.99%
To
35.99%

Credit Req.

Minimum 500 FICO

Minimum Credit Score

Terms

24 to 60

months

Fees

Varies

LEARN MORE Secured

on LendingTree’s secure website

LendingTree is our parent company.... Read More

Dlugozima advised contacting the National Foundation for Credit Counseling’s referral service. “They have stringent industry standards, so you will be referred to a legitimate nonprofit organization that can help you choose the best approach.”

When does debt consolidation make sense?

Read the fine print, Sokunbi said, since some debt consolidation products have terms that may be temporary. “People should be mindful of whether there are any penalties or fees or if you’re going to lose any special perks or be charged any fines,” Tresidder added. “You also have to find out from the company offering the bulk loan what types of loans they will allow to be consolidated.”

Don’t dig a deeper hole. Most importantly, consumers should examine their budgets to determine whether they can comfortably afford the new monthly payment. “Do not add insult to injury when you’ve already got a debt problem,” said Tresidder. “The fact that you’re a debtor shows that you lack financial savvy to begin with, so do extra due diligence and recognize that you’re trying to solve a problem and you don’t want to make it worse.” Make sure to get the lowest interest rates possible. Shopping around to find the best offer will save you money in the long run.

Calculate your loan payments and how long it will take to repay your debts using LendingTree’s debt consolidation loan calculator. LendingTree is the parent company of MagnifyMoney.

When is debt consolidation a good idea?

Chris Dlugozima, education specialist with GreenPath Financial Wellness, said that debt consolidation is ideal for individuals with a reasonably good credit score who have an isolated reason for having fallen behind on their debts. “A debt consolidation loan can make sense for someone who has identified the cause of why their debt has crept up and has already addressed that. Like, ‘I lost a job, but now I’m back at work.’ Or, ‘I was overspending, but now I’ve had some success following a budget and I’m confident I won’t get back into that situation,’” he said.

Having a good credit score allows more options to be available when deciding to consolidate debt at a lower interest rate. Whether you decide using a personal loan, home equity, or even potentially qualifying for a balance transfer card, your credit score will likely be the biggest determining factor when deciding which option is best.

It may be a necessity for others, a lifeline for those in danger of falling behind on bill payments. “If you’re in a situation where you can’t make your payments at the lower interest rate, and the extended terms allow you to make your payment so you don’t go into default, then that helps as well,” said Tresidder.

When is debt consolidation a bad idea?

A certified credit counselor might recommend a debt-management plan as an alternative to debt consolidation for those with significant debt, or for people who are struggling to address the root cause of their debt.

“If you’ve ever tried to shovel in a blizzard, it might feel like you’re accomplishing something, but are you?” said Dlugozima. Debt consolidation can often feel the same way. “You get a sense of relief that you’ve solved a problem when you maybe haven’t.” When existing debts are paid off with a debt consolidation loan, some consumers may start feeling comfortable and become tempted to let those debts creep back up again, especially with credit cards.

Debt consolidation isn’t an ideal fit for those with below average to poor credit scores. The main benefit of debt consolidation is to roll all debt into a loan with a lower interest rate than what’s currently being paid. Having a below average to poor credit score pretty much nullifies this since you’ll end up with a loan with a sky-high interest rate.

What’s your goal? Debt consolidation may even increase your financial burden if you don’t carefully review an offer. A lower monthly payment might be deceptive if the terms are significantly longer. “A lot of people think only in terms of monthly payments, but you’ve got to look at the total of what you’re paying. You might have a lower interest rate and a longer term, but effectively you’re paying a higher total cost,” Tresidder said.

If you aren’t focused on the end game of becoming debt-free, a debt consolidation loan might not be the best approach for dealing with existing debts. “If you’re just trying to avoid a creditor or shift your pay dates around, that doesn’t solve a problem, it just delays the inevitable,” Sokunbi said. She advised searching online or picking up a book on debt repayment strategies to start you off on the right foot. “They will talk you through the best approach to paying off this now consolidated debt because that’s just Step 1 to getting yourself out of debt.”

How does debt consolidation affect your credit?

Consolidating debt with a loan can have both positive and negative effects on your credit score. “It’s very nuanced. It depends,” said Dlugozima. “If it’s done in a way that doesn’t allow additional debt to accumulate, it probably won’t immediately affect the credit until the debt gets paid down.”

The negative effects of debt consolidation on your credit score

If you close your accounts as they are paid off, that can be damaging to your score. Older accounts make for a better credit score; closing accounts means that your credit utilization ratio increases as your credit limit decreases, which also negatively impacts your score. On the flip side, if you continue to spend on the accounts you’ve paid off with your loan, your credit score can take a dive. “If you just pay the minimum balance on your debt consolidation loan and go back to those old zero-balance credit cards and start racking up debt, it’s going to negatively impact your credit,” said Sokunbi.

How debt consolidation can improve your credit score

Successfully paying off debt will most certainly have a positive effect on your score in the long term, as large debts and late payments can really bring your score down. “If you’re currently incurring penalties because you can’t make your payments and by consolidating you’re able to make your payments, clearly that’s going to help your credit score over time,” said Tresidder.

— Click here to get a deeper understanding of the effects of debt consolidation on your credit.

Alternative options to pay off debt

A debt consolidation loan is just one approach to consolidating debt. Depending on your unique needs and financial situation, another option might be preferable.

Balance transfer

A balance transfer is a popular approach to managing credit card debt. By transferring the balances on existing cards to a new card with a more attractive interest rate, consumers get the mutual benefits of simplified payments and cost savings. Many individuals take advantage of introductory offers of 0% interest for a certain length of time in order to make headway on their debt without the added expense of interest. To qualify for a balance transfer credit card, it’s best to have a good or excellent credit score.

“You have to read the fine print and you have to understand the numbers. If you know you’ll be able to pay off the entire balance before the introductory offer expires, it can save you a significant amount of money,” Sokunbi said. “But once that introductory rate expires, it’s often much higher than where you are coming from.” Some intro 0%-interest credit cards also have severe penalties and rate increases if you miss a payment, so proceed with caution.

It is convenient to shop for a balance transfer credit card online with our list of the best balance transfer credit card offers.

Pros

  • Potentially an intro 0% interest rate for up to 21 months
  • Easy to create a repayment schedule
  • Easy to shop for online

Cons

  • Good or excellent credit recommended
  • Attractive rates are often for a limited time only
  • May have penalties and rate increases

Recommended balance transfer card:

Discover it® Balance Transfer

APPLY NOW Secured

on Discover Bank’s secure website

Rates & Fees

Read Full Review

Discover it® Balance Transfer

Regular APR
13.74% - 24.74% Variable
Intro Purchase APR
0% for 6 Months
Intro BT APR
0% for 18 Months
Annual fee
$0
Rewards Rate
5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate. 1% unlimited cash back automatically on all other purchases.
Balance Transfer Fee
3%
Credit required
good-credit
Excellent/Good Credit

– Learn how to use a balance transfer to attack debt here!

Budgeting

Snowball versus avalanche. If you have the willpower to stick with a DIY debt repayment strategy, a debt snowball or debt avalanche approach might be right for you. With both approaches, you pay the minimum balance each month on all but one debt.

In a debt snowball, you pay all extra money toward the smallest debt until it is paid off and then move on to tackling the next smallest until all of your debts are gone. In a debt avalanche, you pay your debts off in order of their interest rate (highest first), which gives you the lowest mathematical cost of paying off the loan.

“One is focused on cost, but the other gives you the highest emotional satisfaction because you can see those loans getting paid off quicker, which allows you to stick with it better,” said Tresidder. “One is financially the best solution and the other is emotionally the best solution. It’s going to depend on the individual, what they need to stick with the plan.”

>> Enter your debts into our Debt Snowball vs Debt Avalanche calculator to see which method is best for you!

Sticking to a budget is self-satisfying and free of fees. But, you need to be realistic about whether or not you have the determination to stay on task. In many cases, people who are already deeply in debt might not be equipped to make the most responsible financial choices.

Pros

  • No-cost option
  • Emotionally satisfying
  • Building good financial habits for the future

Cons

  • May be difficult to stick with

Debt relief programs

When engaging with a debt settlement company, it is essential to first check their reputation. “You have to be very careful with these companies. They’re one of the top consumer complaints,” Tresidder warned. “But, there are people who have gone down the tube so far they’re completely desperate and this may be their only choice.”

With debt settlement, a company will negotiate your debts with your creditors on your behalf for a fee. Often, you pay the settlement company and they make your payments for you. In the process, they allow some of your accounts to go into default so your creditors will be more motivated to negotiate down the balances. “I would not go with any debt settlement company that tells you to pay them before they have a negotiated deal and before you begin payments directly on the amount,” Tresidder said.

Pros

  • Offers help for individuals in serious debt trouble
  • Provides strict payment schedule
  • People who complete the program usually pay-off their unsecured debt in 24 to 48 months. This assumes that they complete the program.
  • Better option than filing bankruptcy.

Cons

  • Some companies in this space may use predatory practices
  • Can negatively impact your credit score
  • May result in legal ramifications if not done properly
  • For some people, depending on their financial situation, they may have to pay tax on amount of debt that was reduced

If you have time and patience, you can try to negotiate your debt directly with the creditors. If you would like professional help to negotiate your debt on your behalf, then a debt relief company can help. Click here to compare leading debt relief companies.

How to make debt consolidation work for you

When deciding the best way to consolidate your credit card debt, or whether a debt consolidation loan is the right step for you, first consider your financial habits and your commitment to make a change. “A debt consolidation [loan] is putting a Band-Aid on a problem. It’s not a solution. Debt consolidation is merely changing the terms of your loan to create a payment that’s easier for your situation,” Tresidder said.

As part of your debt consolidation efforts, consider speaking with a debt management planner or a credit counselor. “There are a lot of great non-profit ones that are actually there to support you and help you and guide you. When you meet with a legitimate credit counselor, you will have a budget, you will look at your credit report, you will analyze your debt and your options, and you will leave with a detailed written action plan,” said Dlugozima.

Most importantly, do your research. Shop around and find an offer that helps you streamline your payments and saves you money.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Ashley Sweren
Ashley Sweren |

Ashley Sweren is a writer at MagnifyMoney. You can email Ashley here

TAGS:

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