Payoff at a glance: Payoff lends only to borrowers with good credit who are serious about consolidating credit card debt. Payoff is a good fit for borrowers who:
- Are serious about tackling their credit card debt. Borrowers have an average balance of $15,000 that they want to consolidate.
- Have a good credit score. Payoff’s minimum credit score is 660.
- Have a high income; borrowers’ average is $77,000.
- Want a personal touch. Borrowers get handwritten welcome notes in the mail once they’re approved and can set up a call with a Payoff “member advocate” to talk about their financial goals and how to achieve them.
- Need help staying disciplined. The representative also provides support and financial guidance as you pay back the loan. For example, if you miss a payment, you won’t be charged a late fee; instead, you can set up a call with your representative to create a payment plan.
- Seek financial tips. Rejected applicants can talk to advocates about how to build credit or lower debt in order to qualify for a Payoff loan.
Detailed Payoff personal loan review
To review Payoff, NerdWallet collected more than 30 data points from the lender, interviewed company executives, completed the online loan application process with sample data, and compared the lender with others that seek the same type of customer or offer a similar product.
While Payoff doesn’t force you to pay off your credit cards, it makes personalized recommendations to keep you on track, using quizzes that assess your financial personality, your level of financial stress and how your wealth compares to others’. Based on your results, Payoff will serve up tools and resources to help you stick to your goal.
“Having this personal insight into your habits is huge,” says Scott Saunders, chief executive officer of the Costa Mesa, California, company. “It empowers you to make better financial decisions in the future.”
Payoff says it is working on an option that would allow direct payment to creditors, a feature that both Discover and FreedomPlus already offer and one that guarantees the loan is used as intended, minimizing risk of a borrower spending it elsewhere in a weak moment. Discover doesn’t charge an origination fee, while FreedomPlus gives borrowers a discount on its interest rate if they choose the direct-pay option. Payoff’s interest rates are comparable to those of other online lenders.
All borrowers also have free access to their FICO credit scores on a monthly basis, a feature that few online lenders offer.
How to apply
Fill out an application on Payoff’s website. The company conducts a soft credit check, which won’t affect your credit score, with credit bureau TransUnion. At this point, Payoff will show you your credit card balances and a representative may reach out to you with a suggested loan amount (which may be lower than what you asked for):
Once you’re approved, you can choose from one or more loans. Payoff displays the loan terms by monthly payments or annual percentage rate. It charges an origination fee between 2% and 5% of the loan amount, depending on the length of the loan:
At this point, you’ll need to fill out a detailed application and provide your Social Security number. Payoff will do a hard check on your credit report, which may affect your score (if it approves a loan, Payoff reports all of your payments to TransUnion, and timely repayment can boost your score):
After you complete the application, you can choose to link your bank account or upload documents to verify your identity and income:
Payoff will provide personalized recommendations throughout the life of your loan:
Minimum requirements for a Payoff loan
- Minimum credit score: 660.
- Minimum gross income: None, but borrowers’ average is $77,000.
- Limitations: Loans can be used only to pay off credit card debt.
- Minimum credit history: 3 years.
- Maximum debt-to-income ratio: 50% or less.
Payoff’s lending terms
- APR: 8% to 25%. As of December 2016, Payoff data show the median rates by credit tier for a 3-year loan up to $15,000 are:
Excellent (720 to 850): 14%
Good (690 to 719): 17%
Average (660 to 689): 19%
Average (630 to 659): NA
- Minimum loan size: $5,000.
- Maximum loan size: $35,000.
- Minimum loan duration: 2 years.
- Maximum loan duration: 5 years.
- Time to receive funds: 2 to 5 business days.
Payoff’s fees and penalties
- Origination fee: 2% to 5% of loan amount, depending on length of loan.
- Late fees: None.
- Personal check processing fees: None.
Before you take a personal loan
Consider other debt consolidation options. If you have good credit, you have cheaper options than an unsecured personal loan. You might be able to find a 0% credit card promotional offer. Someone who owns a home might be able to get a home equity line of credit. And you’ll still want to compare other lenders. (See “Personal Loans for Debt Consolidation.”)
Check your credit and know your financial strengths. Your chances of being approved for a loan and the interest rate you’re offered depend on your credit score, but also on the length of your credit history, your income and other debts you have. A high credit score may be negated by high debt level, for example, or a low score bolstered by a high income.
Learn how personal loans work. You’ll need to give lenders certain personal information to verify your identity and your income, as well as check your credit.
Calculate payment scenarios. Run the numbers on different amounts at different rates; consider how the payments might affect your monthly budget.
Have a plan for getting out of debt. Personal loans may help you tackle debt, but in the long run you’ll need a budget that lets you to live off your earnings and also put something away for emergencies and opportunities.
Amrita Jayakumar is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @ajbombay.
This article was updated June 24, 2016. It was originally published Oct. 12, 2015.