Approved for Payoff personal loan 6.99% but is it smart?

[ajsimeon]

So I'm looking for a smart way of getting my credit score up along with just being smart about money.  I just got approved for $20,000 with 6.99% from Payoff.  I'm somewhere in the 675-700 range depending on where you look and my only issue is credit card utilization which is at 30-32% and have a good history and good credit mix.  I've been bouncing these credit card debt on 0-1.99 BT's every 12 months or so and paying what I can to get this down.  What should I do?

1). Take the $20,000 loan and pay off the credit cards which would put my utilization rate at under 7% which I'm sure would shoot my score up?

2).  Don't take the loan and keep bouncing around the credit card at 0-1.99 BT's and stay in the 675-700 range?

Am i answering my own question on what is smart?  If i want a higher credit score and want to pay more interest take the loan and if I want to keep my credit score around the same range and pay less in interest, keep doing what I'm doing.  Or am I completely off here?

[M_Smart007]

Calculate in the CC transfer fee and interest?

I would take the loan, just don;t rack your cards back up.

The CC BT merry go round can cost a lot, if not paid off.

Just my humble $0.02 worth.

[ajsimeon]

Totally forgot about the BT fees.  That does make sense.  Not all my cards have 0 transfer fees like Navy Federal...thanks M_Smart!

Also is this a good apr for a personal loan?  I haven't done much personal loan shopping but seems pretty good...

[M_Smart007]

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@ajsimeon wrote:

Totally forgot about the BT fees.  That does make sense.  Not all my cards have 0 transfer fees like Navy Federal...thanks M_Smart!

Also is this a good apr for a personal loan?  I haven't done much personal loan shopping but seems pretty good...

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6.99% is a great APR  .. compared to most CC  APR's.

[kilroy8]

So, I Googled it, and the Payoff place is P2P lending, like Lending Club.

So the APR they report doesn't include the likely high fees that they will add to your loan. They could make the effective interest closer to 10%.

Beware.

[tcbofade]

6.99 on a personal loan is an awesome rate.

As @kilroy8  mentioned, look for hidden fees.  Start up, prepayment, yadda, yadda, yadda.

[ajsimeon]

Thanks Kilroy...they did take an origination fee which is crap but it was only $100 so I guess yeah the total percentage is probably a little bit more.

[DaveInAZ]

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@ajsimeon wrote:

Thanks Kilroy...they did take an origination fee which is crap but it was only $100 so I guess yeah the total percentage is probably a little bit more.

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A $100 origination fee on a $20k personal loan is also a good deal, I did a $5k Prosper loan several years ago and as I recall the fee for 1/4th your loan was $200.

But in your first post you said this was about improving your credit score by getting your credit card utilization way down. You need to remember that loan utilization also factors into Fico scores, and this new loan will be at 100% utilization, holding down the score bounce from lowering CC utilization. The only loan I have on my credit report is my car loan from 2017 and I still get "Loan Balances too high!!" as a factor holding down my score even though I've paid off 45% of it, supposedly this goes away once you get a loan under 50% of original amount.

[ajsimeon]

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@DaveInAZ wrote:

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@ajsimeon wrote:

Thanks Kilroy...they did take an origination fee which is crap but it was only $100 so I guess yeah the total percentage is probably a little bit more.

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A $100 origination fee on a $20k personal loan is also a good deal, I did a $5k Prosper loan several years ago and as I recall the fee for 1/4th your loan was $200.

But in your first post you said this was about improving your credit score by getting your credit card utilization way down. You need to remember that loan utilization also factors into Fico scores, and this new loan will be at 100% utilization, holding down the score bounce from lowering CC utilization. The only loan I have on my credit report is my car loan from 2017 and I still get "Loan Balances too high!!" as a factor holding down my score even though I've paid off 45% of it, supposedly this goes away once you get a loan under 50% of original amount.

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Yes but doesn't installment loans get weighted much less then revolving?

[Anonymous]

I would 100% take the Payoff loan... in fact, I recently took out a debt consolidation loan with them as well!  The approval/verification process was quick & relatively painless, and the funds were in my bank account within 1 week of my initial application.  As for the fees, I don't know about you but I was offered 3 different rates/terms when I applied- some did include extra fees, I opted to take the shortest term (24 months) which gave me the lowest APR and highest monthly payment, but no fees at all.  I borrowed $10k and I'm going to pay back roughly $10,650 over the life of the loan- you could easily pay much more than that in BT fees if you keep bouncing your debt around.  Also, all of my scores have jumped into the 720-740 range (from mid-high 600s) within less than a month of taking out my loan.  It's really a no-brainer as long as you pick the right terms, get a monthly payment you're comfortable with and don't run up your credit cards again.  Congrats & good luck!