Is Payoff Legit? A Quick Overview of Happy Money’s Payoff Loan

Credit card debt is at an all-time high of approximately $930 billion and shows no signs of slowing down. This means you likely have your fair share of credit card debt.

While credit cards aren’t all bad, their high interest rates can lead to huge monthly fees if you maintain a high balance. This is where debt consolidation options such as personal loans and lines of credit can help.

They offer you a lower fixed-rate loan or credit line you can use to pay off your higher-interest credit card debt. Then, you make fixed monthly payments on the loan or line of credit for the loan term.

Happy Money — formerly known as Payoff — offers a debt consolidation loan it calls the Payoff Loan. With so many potential scams and illegitimate debt-management offers, you’re likely wondering, “Is Payoff legit or just another gimmick?”

Below, we answer that question and go over the basics of the Payoff Loan and how to determine if it’s a good idea for you.

What is Payoff?

The Payoff personal loan — officially named the Payoff Loan — is a product offered by Happy Money. It’s a personal loan you can use as a debt consolidation loan. Payoff personal loans are available in amounts of $5,000 to $40,000 with a two- to five-year term and an annual percentage rate (APR) starting at 5.99% and as high as 24.99%.

Note the minimum loan amount in New Mexico is $5,100 and in Maryland is $6,100.

Is Payoff legit?

Happy Money, which was once known as Payoff, is a legitimate company with numerous independent reviews. It was named Forbes’ best personal loan of February 2022 and has an A+ rating from the Better Business Bureau (BBB).

So, is Payoff legit? Yes, Payoff is a legitimate financial services company that helps people get out of debt.

How does Payoff work?

To prequalify for the Payoff Loan, you start by using its Check My Rate page and entering your name, birth date, ZIP code, address, phone number, annual income, and rent or mortgage amount. Then, you’ll enter your email address and create a password for your account.

Click the “Agree and Check My Rate” button, and Happy Money will perform a soft credit inquiry — there’s no impact on your credit score — and show you your existing credit card debt based on that credit pull. Review your debts, then enter the loan amount you’re seeking to view your loan offers.

The loan offers will have varying terms and interest rates. The rates generally go down with shorter terms, but the monthly payment amounts will increase because the repayment term is shorter. The Payoff offers will also include 0% to 5% origination fees that increase with the loan's length.

After you select the loan terms you like, you’ll enter your employment information and Social Security number for identity verification only. You then choose what credit cards to pay off based on the soft credit inquiry, and you must have the credit cards available to verify the card numbers. Any remaining loan balance will be deposited into your bank account. You can also skip this step and have 100% of the funds deposited into your bank account.

It takes about three to five business days to pay off your credit cards, and the remaining balance takes about five to seven business days to reach your savings or checking account.

Once you complete the loan process, you start making monthly payments to Happy Money until you pay off the loan.

Is Payoff a lender?

While Payoff presents itself to borrowers as a lender, it doesn’t directly lend money. Instead, Happy Money works with lending partners to fund its loans. Its lending partners include Alliant, GreenState Credit Union, Teachers Federal Credit Union, USALLIANCE Financial, and more.

Does Payoff charge fees?

Now that we’ve answered the question, “Is Payoff legit?” you likely want to know what fees you’ll have to pay. We’ve already mentioned the 0% to 5% origination fee, but are there other hidden fees?

According to Happy Money — the company behind the Payoff Loan — it charges no fees other than the origination fee. This includes:

• Application fees

• Payment fees

• Prepayment penalties

• Late fees

• Check processing fees

• Returned check fees

• Annual fees

How to get approved for the Payoff Loan?

Happy Money has relatively strict approval guidelines for the Payoff Loan.

First, you must have at least fair credit. In Happy Money’s standards, a 600 FICO® credit score is the minimum for approval. With good credit, you’ll likely get more favorable loan terms.

Happy Money also requires you have no current delinquencies. If you have one, it recommends settling the delinquency before applying for a Payoff Loan.

Those are the two main factors Happy Money looks at when considering your Payoff Loan application, but it also states it may consider:

• Debt-to-income ratio (DTI)

• Age of credit history

• Open and satisfactory tradelines

• Credit utilization ratio

Does the Payoff Loan affect my credit score?

The Payoff Loan’s initial loan application process requires only a soft credit inquiry to check your credit score, existing debts and delinquencies and to verify your identity to determine eligibility. This process will not impact your credit score.

However, Happy Money’s terms state it will perform a hard credit inquiry before the lender finalizes the loan. This credit check will appear on your credit report and can lower your FICO Score by as many as five points.

But the Payoff Loan’s impact on your credit score goes beyond just the hard credit pull.

New account

Once you officially accept the debt consolidation loan, a new loan account will appear on your credit report. This will impact the new credit factor in the FICO credit score algorithm, which accounts for 10% of your score. While it’s a small percentage of your credit score, it could still cause a temporary credit score decrease.

Length of credit history

Adding this new account will also shorten your average credit account age, which can impact the length of credit history factor. This accounts for 15% of your FICO Score. Again, the percentage is small, but you may see a temporary credit score reduction in the early stages of your loan.

Credit mix

The credit mix is the variety of revolving credit (e.g., credit cards, lines of credit) and installment credit (e.g., personal loans, auto loans, mortgages) in your name. The more balanced this is, the more positively it impacts your credit score. If you have all revolving debt, adding the Payoff Loan could positively impact this factor, which can help improve your credit score.

Credit mix accounts for only 10% of your FICO Score, so the impact would be small.

Amounts owed

The amounts owed FICO scoring factor looks at the total amount of debt you have and also considers your credit utilization ratio, which is your revolving debt balances relative to your total credit limit. The lower your credit utilization ratio is, the more positively it impacts this scoring factor.

Assuming you use the entire loan balance to pay off your credit cards, the total amount of debt you owe will remain the same. What will change is your credit utilization ratio. For example, if you have $25,000 in credit card debt and $50,000 in total credit limit, you have a 50% credit utilization rate, which is high and can negatively impact your credit score. Getting a $20,000 loan to pay down your credit card debt drops your credit utilization rate to only 10%.

The amounts owed factor is the second most important FICO scoring factor, accounting for 30% of your score. So, lowering your credit utilization ratio with a debt consolidation loan may significantly improve your credit score. This positive impact can happen quickly, too, potentially making up for the negative impacts listed earlier.

Payment history

The largest FICO Score factor is your payment history, accounting for 35% of your score. This factor looks at your payment history of credit cards, mortgages, auto loans, lines of credit and other debts to see if you’ve been late by 30 days or more. It also factors in collection accounts, bankruptcies, judgments, wage garnishment and other items of public record.

This factor will positively affect your credit score if you have no negative marks on your payment history. However, excessive late payments and other negative marks can cause credit score decreases. This includes payments to the Payoff Loan.

If you make routine on-time payments to Happy Money, you can improve your payment history and credit score. However, a few missed Payoff payments can lead to credit score decreases.

Is getting a Payoff Loan a good idea?

High-interest credit card debt’s APR can sometimes exceed the 30% mark. This can lead to significant interest charges every month. So, paying it off with a lower-interest debt consolidation loan or line of credit is beneficial.

Payoff Loan’s APR ranges from 5.99% to 24.99%, so it may be lower than what you’re paying on your credit cards. To determine if a Payoff Loan is a good idea, compare the APR it offers with the APR on the credit cards you intend to pay off with the loan. If the Payoff Loan’s APR is lower, and the monthly payment is affordable, it may help you pay off your debt and save on interest charges.

However, it's a good idea to compare any loan to other debt-reduction options, such as:

• Other loan companies: Some lenders may have lower interest rates, fewer fees or more affordable monthly payments.

• Other loan types: Other loan types, like lines of credit or home equity loans, may suit you better. For example, the Tally† app offers a lower-interest line of credit to help you pay off your higher-interest credit card balances, but it also manages your credit cards for you so you don't have to worry about missed due dates.

• Alternative payoff methods: Think outside the box with your debt repayment plans. Perhaps you have a 0% interest balance transfer credit card you can transfer your balances to and pay it off with no interest at all before the promotional period ends. Or maybe setting up a debt avalanche or debt snowball plan will work for you instead of taking on new debt.

Payoff is legit and may be worthwhile

Is Payoff legit? Yes, Payoff is a legitimate credit card debt consolidation company that works with lending partners to help borrowers get out from under high-interest credit card debt. In some cases, it can be helpful, but only if the loan’s APR, which can range from 5.99% to 24.99%, is lower than the credit cards you intend to pay off. Also, it’s only beneficial if you can afford the monthly payment.

If managing credit card payments is causing you stress and impacting your finances, the Tally†credit card debt repayment app can help. The Tally app helps manage your credit card payments, and Tally offers a lower-interest personal line of credit, so you can pay off higher-interest credit cards more efficiently. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 to $300.