Rewards credit cards are a tricky thing: One moment you’re reaping the rewards, and the next you’re up to your eyeballs in interest-bearing debt. It happens, so don’t beat yourself up over it. Instead, let’s figure out how to fix it with a debt consolidation loan from Payoff.
How Did I Get So Deep In Credit Card Debt?
Many of us have been there: You’re trying to maximize your rewards and overspend, or a financial hiccup comes and, boom, you cannot pay off that balance. The key is not to dwell in what happened — of course, you need to figure out what caused this and avoid it in the future — and work toward paying it off.
This is where the folks at Payoff come in to play.
How Can a Payoff Debt Consolidation Loan Help?
It may sound weird to go into debt to get out of debt, but hear me out. A payoff debt consolidation loan packages all your credit card debt into one deal and pays it all off with a loan. Of course, there is interest involved in this loan, but with rates ranging from 8 to 25%, there’s a good chance this loan’s payment will be lower than the monthly minimum on your handful of credit cards.
What’s more, this is a closed-term loan, so you can see the light at the end of the tunnel. Sure, I am generally not a big supporter of the psychological side to debt and paying it off, but this is one area where I think that end date is huge.
On top of all that, because your monthly payment should drop significantly with a consolidation loan from Payoff, you may be able to make excess payments. This will help pay off that loan even quicker and save you a ton in interest.
How Much Should I Borrow?
Seems like an easy enough question to answer, right? Just add up all your balances and, boom, payoff amount. Slow your roll there, chief, it’s a bit more complex than that.
There is a good chance that even after you consolidate your credit cards you’ll end up with some residual interest the following month. The last thing you want to do it end up with extra payments the following month to cover this interest.
To help avoid this issue, I recommend adding up all your credit card debt and adding another 10% to that — this is what you should borrow. This way, if there is any interest the following month, you have the loan to pay it off. And if you end up having some left over, just apply it to the first loan payment.
Should I Include My No-Interest Credit Cards?
If I have a no-interest credit card with several months left on its promotional period, what good does it do to include it in an 8% consolidation loan? That’s another tricky question only you can truly answer, but I have some food for thought.
A debt consolidation loan has two functions: cut interest and stabilize monthly payments. The latter comes in to play when dealing with no-interest cards. If you can afford to make the monthly debt consolidation loan payments and the no-interest card payment while staying on track to pay t off before interest starts to accrue, then there is no need to include it. But if you cannot, you may want to consider adding it to this loan to avoid any issues.
The key here, though, is to be honest with yourself. Don’t let your pride get in the way of your financial freedom.
What are Payoff’s Terms?
There are, of course, terms to consider when debating a debt consolidation loan.
Payoff loans are available for between $5,000 and $35,000, and you can take 24 to 60 months to pay it back. The interest ranges from 8 to 25%, depending on your credit history and the terms of the loan.
To qualify for a Payoff loan, you must have at least a 640 credit score. You can check your credit score for free at Credit Sesame or Credit Karma.
Finally, if you live in Maine, Missouri, Nebraska, Nevada, Ohio, or West Virginia, you’re out of luck, as Payoff does not offer loans in these states.
We love sniffing out rewards for you, but sometimes we have to sniff them out for ourselves too. This post contains affiliate links, and The Points Hound may receive a commission if you sign up for an offer.