Payoff recently announced they will now provide monthly access to FICO® Scores for free beginning January 2016 to its members who have refinanced their credit card balances with a Payoff Loan.
Payoff Members will have access to their FICO Score, as well as trending information and educational resources describing factors contributing to their score. FICO Scores will be refreshed monthly based on Transunion data to give Payoff Members up-to-date information, which will include:
- FICO® Score with two key factors impacting their score
- FICO® Score Meter to show them where they fall within the credit score range
- A visual of the score range to help them understand what each range means to financial institution
- A breakdown of the factors that contribute to FICO® Scores
A study of Payoff members from December 2014 through September 2015 found that those who paid off $5,000 in credit card balances using a Payoff Loan saw an average increase in their FICO Score of 40 points.
We all know that paying the minimum balances on credit cards doesn’t work if you’re trying to get out of debt.
As an example using Bankrate.com’s credit card minimum payment calculator, a $5,000 credit card balance at 18% interest and making a $125 (2.5%) monthly minimum payment, would take 272 months to be rid of your debt and cost you $6,923.14 in interest!
Credit card debt is a serious situation. Especially when juggling more than one card and when your budget is only allowing for minimum payments.
Sure, you can squeeze your budget, cut costs, and work extra. This should all be done at a minimum! You might even have to do some work to renegotiate interest rates (we’ll show you a tool to help with this in a bit).
Some people rely on debt consolidation and transferring balances over to low or no interest cards. That’s certainly an option, but you’ll start paying interest again after X amount of months and there may be an upfront fee to conduct the transfer.
Thus begins the balance transfer game and moving your debt from one card to another.
We recently became introduced to a company dedicated to helping people pay off their credit card balances. They’re appropriately called, Payoff.
In today’s post, we explore how Payoff works and what we see as some of the advantages and disadvantages. Here’s our Payoff review.
About Payoff & The Payoff Loan™
With the Payoff Loan™, you can pay off balances between $5,000-$25,000 in 2-5 year terms. They state that they are not a bank, and their loan application process won’t hurt your credit score because they only do a soft credit check.
Payoff works with a bank partner, First Electronic Bank, to originate loans for their members. They also do all the underwriting and servicing themselves to simplify the process, loan terms and rate options.
What interest rates can you expect?
They currently offer “fixed rates between 6.00% (8% APR) and 19.65% (22% APR) for loan amounts from $5,000 to $25,000.” Per the website, your rate is determined by your credit score, loan amount within their range, credit usage and history.
The Payoff Loan™ Terms
There are no an application fees, prepayment penalties, late fees, check processing fees or annual fees. They have one fee, called the Payoff Platform Fee, which you can expect to be 2-5% of the loan amount and is based on the length of the loan.
There is also a $15 returned payment fee should your account not cover the payment or your check bounce.
Again, the goal is to focus on helping people with credit card debt go through a simplified process to secure a loan and turn their finances around in relatively little time.
However, The Payoff Loan™ isn’t for everyone. There are specific requirements you’ll need to meet in order to qualify for a Payoff Loan™, and here’s what you can expect:
- FICO Score: 660 or higher
- Debt to Income Ratio (Unsecured): Less than or equal to 50%
- Credit History: At least 3 years of credit
- Open and Satisfactory Trades: 2 open and satisfactory trades and no more than one installment loan in last 12 months
- No current delinquencies
So, your finances need to be in decent shape to qualify. In other words, you might need to do some clean up work before you do business with Payoff, which they offer help with through Lift – their free financial wellness platform. Payoff Lift helps you save money, control spending, negotiate with creditors for lower rates, and ultimately become more financially well.
Disadvantages of Using Payoff.com
Limited availability – The Payoff Loan™ is not available in these 21 states (check the Payoff website for updates): Alabama, Arizona, Colorado, Connecticut, Delaware, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, Pennsylvania, South Dakota, Texas, Vermont, Wisconsin, and Wyoming.
Deposited into your account – It would be nice if Payoff took care of the credit card company payments for you or allowed you to do so directly from their website. However, the funds are deposited directly into your checking account. I fear that some people may not get around to using the money to pay off their credit card debt and opt for the summer vacation instead.
While this isn’t necessarily Payoff’s problem, credit card debt is usually the result of behavioral issues that need to get corrected. If the behavior hasn’t changed, additional funds can result in bigger problems.
Qualification requirements – Along with limited states, Payoff is looking for a somewhat specific customer. If you’re in a lot of trouble, missing payments, have a low credit score, etc., again, you’ve likely got some work to do before Payoff can help you. You can use Payoff’s free financial education platform, Lift, to help boost your credit and prepare for a loan. You can also reach out to them to see what advice or other resources they might be able to provide.
Advantages of Using Payoff.com
Don’t have to open a new card – A lot of people open up new credit cards to consolidate credit card balances and work towards paying off debt. The problem in doing so is that debts often grow larger because people feel a sense of relief and run up their balances again on the clean cards.
Focus to pay off credit cards – Payoff only provides loans to pay off credit cards so their service is highly focused on helping people in this particular area. That could be seen as a disadvantage for some who have student debt or car loans, but they are laser focused in helping people overcome problems with high interest credit cards and keeping them from being taken advantage of by credit card companies.
Payoff’s Financial Personality Quiz – They have a quiz designed to help you become more financially aware so you can improve your financial habits. It’s a fun 3-minute assessment that gives you insight into why you think about your finances the way you do. The FPQ is accessible to anyone regardless of if you have a Payoff Loan™.
Straightforward qualification – Payoff has made the fee structure straightforward so you don’t have to question what you’re paying for your loan. The Platform Fee is your cost of the loan and again, that fee will vary from 2-5% of the loan amount.
Their Member Experience Team – Payoff’s version of customer service. You always get to talk to a real person. Member Advocates understand your challenges, can really relate and want to help you get on a better path. Right when your loan is funded, a Member Advocate sets up a welcome call to discuss your situation and your dreams so they can help you achieve success.
Payoff Review Final Thoughts
Payoff offers yet another option to consider in your debt payoff plan. We do caution, as already mentioned, that sometimes adding an additional loan to a payoff plan is not the answer and can very well backfire leaving you in worse shape. With that, we recommend the following approach:
1) establish a budget; 2) evaluate and change spending behaviors with a budget coach who can hold you accountable; 3) establish a debt payoff plan and begin executing and finally; 4) consider a consolidation loan as a strategy to increase your payoff plan velocity.
If you think Payoff may work for you, the application process is rather easy. You’ll follow 4 steps:
1) check your rate and get loan payment choices; 2) choose a final payment amount and schedule; 3) verify your information; 4) receive funding upon approval.
You can expect a Member Advocate to contact you during the approval process to verify your information and you can contact them any time with questions. If approved, you can expect your loan in 2-5 business days.
Ready to get started? Check your rate and options here.