How to Figure Out the Payoff on Loans

Paying off a debt is a highly satisfying experience--especially if that debt is a home loan or a mortgage. It's very important to pay off a debt correctly, though. If you inaccurately pay off a debt, you may leave a small amount of interest. This interest can build again--unbeknownst to you--and cause late payments that can decrease your credit score. Figuring a payoff is relatively easy.

Instructions

1

Review the most recent loan statement you received from your account holder. The balance listed on the statement is not your loan payoff, but you can use this number to figure your payoff amount.

2

Find the interest rate on the loan, the loan payment, any late fees and any prepayment penalties on the loan. A prepayment penalty is a fee for paying off the loan earlier than expected. If this fee is high (which it undoubtedly will be on a mortgage), you should reconsider paying off the loan.

3

Add your outstanding balance to the following: two months of interest (interest rate multiplied by the outstanding balance), late fees and any other outstanding fees. Make sure you've made the current due payment prior to figuring the payoff balance. Also, you must determine the date you wish to pay the loan in full--it should be either immediately or in the very near future.

4

Contact the customer service department for your account holder. You may need to be transferred to the account servicing department. Ask for a payoff figure for the day you intend to pay off the loan. Make sure that figure comes with a per diem (a daily figure to add to the payoff amount for each day past the payoff).

5

Compare your figure to the company's payoff. When in doubt, use the company-determined payoff figure. Make sure to send the check with plenty of time to spare. Confirm the payment was posted with the customer service department and ask for a paid-in-full letter for your records.