Payoff calculation guide
How to Calculate a Loan Payoff Amount Through a Specific Date
When a payoff balance is known as of one date but the money will arrive later, daily interest can be used to estimate the amount due through the target payoff date.
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Start with the balance as of a known date
Use the principal or payoff balance supplied for a specific as-of date. Do not assume the unpaid principal from a regular statement is automatically the same as an official payoff balance.
Calculate the payoff per diem
The daily payoff interest is generally Principal × Annual Rate ÷ Day-Count Basis. A 360-day basis produces a different per-diem amount than a 365-day basis, so use the method required by the loan documents or payoff instructions.
Count the days through the target payoff date
Determine how many additional interest days must be added after the balance date. Payoff instructions may specify whether the good-through date is included.
Add charges and subtract credits
An official payoff can include fees, advances, legal expenses, credits, escrow adjustments, or other items. The arithmetic extension should not replace a new lender quote when the creditor requires one.
A $125,000 balance at 7.25% on an Actual/365 basis produces about $24.83 per day. Eleven additional interest days add about $273.12 before any other payoff charges or credits.
Frequently asked questions
How do I calculate a payoff through a future date?
Calculate the per-diem interest on the known balance, multiply by the required additional interest days, and add that interest to the starting payoff balance plus any other applicable charges.
What does a payoff good-through date mean?
It is the date through which the quoted payoff amount is intended to satisfy the loan under the creditor instructions, subject to any conditions stated on the payoff.
Can I extend a payoff quote myself?
Only when the creditor instructions allow it. Some lenders provide a per-diem amount for short extensions, while others require a new official payoff quote.
Should I use APR or the note rate?
Use the rate actually used to accrue interest on the loan. The disclosed APR can include finance-charge effects and may not equal the contractual accrual rate.