Are you currently in a position where you have debt stacked across one or more credit card? If so, the interest rates can be crippling. Not only this, but attempting to manage repayments on multiple credit cards can be a daunting task, especially if repayment dates are scattered throughout the month.
If this sounds like you, then you might want to consider Payoff.
In a nutshell, Payoff specialize in one service and one service only – paying off credit card debt. If you’re thinking about using Payoff for this purpose, then we would suggest reading our comprehensive review.
We’ve covered everything from how Payoff works, what its fees are like, and whether or not you are likely to qualify. Upon reading our review in its entirety, you’ll be in the know-how as to whether or not Payoff is the right lender for your individual needs.
Let’s start by exploring what Payoff actually is.
Who is Payoff and What do They do?
Credit card debt is a major issue in the U.S. In fact, according to the Federal Reserve, it is estimated that credit card debt in the U.S. exceeded $1 trillion in 2019 – up from $854 billion just five years previous.
With close to 60% of Americans maintaining a credit card balance that exceeds affordability levels, this not only results in high interest payments, but an unfavorable credit score, too.
In response to ever-growing credit card debt levels, Payoff was launched in 2009. The California-based company specializes in paying off credit card debt on behalf of their customers, which then transitions into a loan agreement between the debtor and Payoff.
The financial services company claims to have more than 11,000 customers, representing a total of $175million in settled credit card debt.
In terms of the settlement process itself, Payoff has partnered with white-label banking provider First Electronic Bank to facilitate its loans. Once a loan is approved, Payoff then proceed to settle the customer’s outstanding credit card(s). The debtor is then required to pay Payoff back, as per the terms of the agreement that was offered during the application process.
Payoff are not like other, more conventional lenders, insofar that they are not in the business of offering multiple loans. Instead, the platform offers just a single loan that is for the sole purpose of paying off outstanding credit cards.
So now that you know who Payoff is and what they do, in the next section of our review we are going to explore who is eligible to receive a loan.
Am I Eligible for a Payoff Loan?
Before delving into the fundamentals, it is crucial to explore whether or not you will qualify for a Payoff loan. The threshold requirements are slightly lower in comparison to traditional lenders, although this is to be expected when you consider the company’s target market.
- Credit Score: The absolute minimum FICO credit score that Payoff will consider is 640. Although your FICO score may vary depending on the specific bureau, the financial services company uses TransUnion. As such, it is well worth ascertaining what your TransUnion credit score is prior to starting your application.
- Credit History: You will also need to posses a credit track-record of at least three years. As such, if you only took-out your first credit product recently, you might not have enough credit history to be eligible for a Payoff loan.
- Income: In order to qualify for a Payoff loan, you will need to have a minimum income of at least $25,000 per year.
- Debt-to-Income: Your debt-to-income ratio is used to assess how much outstanding debt you have in relation to your annual income. For example, if you earn $30,000, and you currently have $15,000 worth of outstanding debt, then your debt-to-income ratio is 50%. In order to be eligible for a Payoff loan, you’ll need to have a debt-to-income ratio of no more than 50%.
- Credit Card Debt Only: Although this point might seem obvious, you can only apply for a Payoff loan if your debt is related to credit card debt. Anything else, and your application will be rejected.
If you meet the above minimum requirements, then it’s likely that your Payoff loan application will be accepted.
In the next section of our guide, we are going to assess the costs of taking out a Payoff loan.
Payoff Fees: How Much Does a Payoff Loan Cost?
When it comes to the costs of obtaining a Payoff loan, this can vary quite considerably depending on your currently credit worthiness.
In terms of the APR, this starts from as little as 5.65% (5.99% APR), all the way through to 22.59% (24.99% APR). The rate that you are offered will depend on a number of factors, such as your current FICO score, your debt-to-income ratio, the size of your outstanding credit card debts, and your annual income.
According to recent figures issued by Creditcards.com, the average credit card APR rate in the U.S. now stands at over 17.73%. These rates are even higher if you are in possession of a credit card that is tailored towards low-to-medium credit scores.
On top of the APR, you also need to make some considerations regarding the origination fee. This is the fee that lenders charge for arranging and preparing a loan agreement. Payoff state that the origination fee can vary from 0% up to 5%. Once again, you won’t ascertain the origination fee amount until you go through the process of pre-applying.
It is important to remember that the origination fee will be deducted from the total loan amount you are approved for. For example, if you take out a Payoff loan for $10,000, and your origination fee is 5%, then you will only receive $9,500 towards your credit card debt.
Do the Fees Charged by Payoff Make it Worthwhile?
Ultimately, whether or not the rates offered by Payoff work in your favor will depend on [A] what rates you are currently paying on your outstanding credit cards and [B] the rate that Payoff offers you.
In layman terms, if the rate offered by Payoff (including that of the origination fee) is lower than the rates you are currently paying, then taking out a Payoff loan is well worth it.
Late Payments and Other Common Fees
It is also important to note that Payoff does not charge any late payment fees, nor are you charged anything if your cheque is returned due to insufficient funds. Furthermore, Payoff does not penalize you if you decide to payoff your loan early.
The elimination of these common fees are great, not least because these are avenues that traditional lenders often utilize to hit borrowers with additional charges.
Size and Duration of Payoff Loans
Payoff loans are available from a minimum of $5,000, all the way through to $35,000. The amount that you are offered will depend on your credit profile. As such, you might be offered a lower amount than you originally asked for.
In terms of the length of the loan agreement, this will vary between two and five years. Payoff note that you have the option of choosing the loan term duration, as long as it falls within the parameters of two-to-five years.
How Does the Payoff Loan Application Work?
Step 1: Check your rates
Before you proceed with your Payoff loan application, you will need to ascertain what sort of rates you are likely to be offered. Fortunately for you, the platform allows you to check your rates in the form of a soft credit check. In other words, assessing how much you are likely to be offered – if at all, will not show up on your credit report.
Step 2: Enter Your Personal and Finance Information
If you are eligible for a Payoff loan, and you are happy with the pre-check rates that you were offered in the previous step, then you can proceed with the actual application process.
Initially you will need to enter some personal information, such as your full legal name, home address, date of birth, and your primary telephone number.
After that, you will then need to provide Payoff with some information regarding your financial circumstances. This will include whether you own your home or rent, how much you currently earn, and a brief breakdown of your monthly expenses.
Step 3: Credit Card Debt Levels
Once you’ve completed the above, Payoff will then seek to assess how much credit card debt you currently have. The company is able to do this by using third party sources, such as the credit card companies themselves, as well as credit rating bureaus. This part of the application usually takes a couple of minutes.
Don’t forget, if the automated Payoff debt-level check ascertains that you currently have less than $5,000 in outstanding credit card debt, then your application is likely to be rejected.
Step 4: Choose how Much you Want to Borrow
In the next stage of the application, you will see all of your outstanding credit card debts on screen. Payoff will then ask you to specify how much of the debt you want to pay off. This needs to be a minimum of $5,000, all the way upto to $35,000.
Payoff will also estimate how much you will need to pay the platform with respect to origination fees. In order to ensure that you are able to pay-off your credit card debt in its entirety, Payoff will suggest that you borrow the total debt amount, plus the origination fee.
Step 4: Set-up Your Payoff Account Login Details
Before proceeding to the next step, Payoff will ask you to enter your email address, and to choose a strong password. These credentials will act as your Payoff login details.
It is also compulsory to select how you heard about Payoff from the drop-down list of options.
Step 5: Choose the Length of the Loan Agreement
On the next screen you will get to choose how long you want to borrow the money for. Every time you change the length of the loan agreement, the metrics of the loan will update. For example, you get to see how much your monthly payments will be, the platform fee, and what the total value of the loan will be once it’s paid back in full.
Step 6: Employment Details and Social Security Number
You will now need to enter details about your place of work. This will include your employment status, the company you work for, your work phone number, and work email address. You will also need to enter your social security number, so make sure that you have this to hand.
Step 7: Review and Sign the Loan Agreement
In the final stage of the loan application, you will need to review the pre-generated loan agreement. Once you are happy with it, you will need to sign it digitally, before completing the application.
Do I Need to Provide Payoff With Any Supporting Documents?
When Payoff attempt to verify your identity, as well as your financial circumstances (such as your income), the lender will attempt to do this automatically by using third-party sources. However, if they are unable to do this, then you might be required to provide them with supporting documents.
This could be a bank statement to prove that you are the true owner of your specified bank account, a passport or driving license to verify your identity, or a recent pay stub or tax return to prove your income.
How Long do Payoff Take to Deposit the Funds?
Once you’ve completed the loan application and received approval, Payoff state that they usually take between two and five days to process the transfer. The funds are then deposited into your U.S. checking account.
As such, it is your responsibility to then directly pay the credit card companies.
Payoff Customer Service
If you have any queries regarding your loan application, or you currently having an outstanding loan with the lender, there are a number of ways that you can contact the team at Payoff. The easiest way to do this is via the platform’s live chat facility.
Failing that, you also have the option of calling the team on 1-800-878-0901.
Both the live chat facility and telephone support line are only available during business hours. Unfortunately, Payoff do not actually specify what these are, however this is likely to be between the hours of 9am and 5pm, Pacific Daylight Time.
If you have a question or concern outside of Payoff’s business hours, then you can send them a message via the online support centre.
Does Payoff Offer a Mobile App?
Payoff does not offer a mobile app, so you’ll need to use the main desktop website. However, the platform has been fully optimized for mobile browsers, meaning that you can still apply and check your account on-the-move.
Payoff Member Benefits
As a lender that claims to “lower stress, understand habits, improve financial wellness, and eliminate credit card balances with a personal loan”, it should come as no surprise to see that Payoff offers a range of member benefits to those that obtain one its loans.
First and foremost, Payoff offers all of its customers a free monthly update of their FICO score. This is useful to see whether or not your credit card pay-offs have resulted in an improvement of your score. Payoff actually claim that its members increase their FICO credit score by 40 points. While there is no way of verifying this claim, if it is true, 40 points is a considerable boost.
The team at Payoff also offer assistance if you’ve taken out a loan, but you’ve since lost your job. This will presumably centre on an adjusted payment plan. As part of the Member Experience Team feature, Payoff also offer a one-on-one welcome call, as well as an additional call every three months.
Payoff Review: The Verdict?
In summary, Payoff are very clear about what they are looking to achieve. They aim to help people settle their credit card debts in the quickest time possible. In return, you as the debtor will take out a single loan directly with Payoff.
Ultimately, whether or not Payoff is worth using will depend on one thing – rates.
If the APR rate that Payoff offer you during the pre-approval stage is lower than the rates you are currently paying your credit card provider, then Payoff is worth using.
If this is the case, not only will it save you money, but you also have the chance to consolidate multiple credit card debts into a single loan. Moreover, by clearing all of the credit card debts in one swoop, Payoff claim that most of their members increase their FICO score by an average of 40 points.
The great thing about Payoff is that you get to check your rates prior to proceeding with your application. As this is classed as a soft credit check, there is no harm is seeing what rates you are likely to be offered.