What Do You Think About Using Tally to Get Out of Debt?

Question:

Dear Steve,

In debt of $10,000 in credit cards and 4,000 from Upgrade. Which I think was a stupid move.

What do you think about the Tally App? It sounds good, but I’m not sure about it.

Dana

Answer:

Dear Dana,

Tally is a solution that uses a consolidation loan to pay off credit cards. Or does it?

The Tally home page says, “Once you accept the offer, we’ll immediately pay off your cards with your Tally line of credit.”

However, the terms of service describe a solution that does not issue a loan or line of credit. According to this page, they say, “You can use the Service to make payments to your credit card accounts in two ways: 1) if you are approved and accept a Tally line of credit, you can pay your cards with funds from your line of credit; 2) you can pay your cards through Tally with funds from your bank account. Payments made to your credit cards with your Tally line of credit are described in your Line of Credit agreement. Payments to your credit cards made through Tally with funds from your linked bank account are described here.”

The terms page also says, “Tally also offers you the ability to manage and pay credit cards linked to your Tally account in a single place. This aspect of the service allows you to make payments to your credit cards from your linked bank account. Tally may charge a monthly fee for this service.”

This leaves me less confident you are getting a loan, consolidation loan, or having your credit cards paid off. The statements sound more like the Tally service could be different than you might assume.

They say they will pay off current accounts, and then you pay them each month. However, the interest rate for the Tally line of credit can be as high as 29.99 percent.

They also say, “50% of Tally+ members can get out of debt about 3 years, or 41%, faster with Tally+.” That sounds good, but they don’t mention what happens with the other 50 percent of customers. That seems like something to ask them.

They go on to say, “We compared how long it would take for a user to pay off their credit card debt if they had received and accepted a Tally+ line of credit and compared that to how long it would take for a user to pay off their credit card debt without Tally. For each borrower we used: (a) their average APR weighted by their initial credit card balances and APRs; (b) an average monthly payment of 3% of their credit card balance(s); and (c) average monthly credit card transactions of 0.8% of their credit card balance(s). We assumed the borrower received Tally+ discount credit every month. Actual pay-off rates will vary based on factors such as each user’s credit card APRs, the total payments made, and additional credit card charges.”

And in there is a pivotal point to consider. There are many more factors to getting out of debt than just consolidating your current cards. Are you going to spend more each month? Will you get new credit accounts? Does a Tally solution fit your situation? Will your previous accounts be closed, which will hurt your credit score?

What I can say with confidence is, in my opinion, dealing with debt alone is an ineffective and incomplete approach.

When it comes to paying off your debt faster and for less money, you don’t need a fancy new loan.

If you are organized and structured, you can stop using your cards and make minimum payments on all your cards but direct an additional monthly amount to the highest rate account. So all together, this is the total minimum payments plus $100 a month, every month.

Let’s say that the minimum amount is $400 plus the extra $100 for a total monthly amount of $500 for all payments. When the highest interest rate card is paid off, please don’t close it but now direct the monthly payment freed up from the old card towards the next highest rate card.

What Do You Think About Using Tally to Get Out of Debt?

As cards and accounts are paid off, they accelerate payments on the next card. So you will get out of debt earlier and for less money. Keep up the total monthly payment until the cards are paid. But don’t close those old cards. You need their history for your credit score.

This approach can save you a lot of interest and time. But, of course, it’s free as well.

If you want to use Tally and follow their automated plan, feel free to do that. However, keep in mind that there is no way of knowing if that is the right approach for you without looking at your overall financial solution. Looking at Tally in isolation is like determining if a hammer is the right thing to use for building a shed. Maybe. But at the very least, it is one of the tools you will need, not the only one.

So what do I think about Tally? Ambivalence is probably the best statement. It feels like an intelligent way to sell new loans from their point of view. But as far as a simple solution for getting out of debt, I’m not yet convinced. It’s also unclear how the program works or what overall results people get.

By the way, while researching to answer your question, , I spotted this in the Tally terms and conditions. It appears they attempt to gag customers from saying negative things. For example, the terms page says, “BY USING THE SERVICE YOU AGREE NOT TO: Post, upload, or distribute any content that is unlawful, defamatory, libelous, inaccurate, or that a reasonable person could deem to be objectionable, profane, indecent, pornographic, harassing, threatening, embarrassing, hateful, or otherwise inappropriate, as determined by us;.”

Why?

Sincerely,

You are not alone. I’m here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don’t give up.

Do you have a question you’d like to ask me for free? Go ahead and click here.

Damon Day - Pro Debt Coach