How to Calculate Your Exact Loan Payoff Date (And Why the Bank's Number Might Be Wrong)

When I called my auto loan servicer to ask for a payoff amount, the number they gave me was $342 more than my balance showed online. That difference was not an error. It was per-diem interest, payoff processing fees, and a timing calculation that most borrowers never think about. Understanding how payoff amounts are calculated protects you from overpaying. Payoff amount vs. remaining balance Your loan balance and your payoff amount are different numbers. The balance is what you owe as of your last payment. The payoff amount adds: Per-diem interest. Interest accrues daily. If your balance is $15,000 at 5% APR, you accrue $2.05 per day ($15,000 * 0.05 / 365). If it takes 10 days from your last payment to process the payoff, that is $20.50 in additional interest. Processing time. Most lenders add 5-10 days of per-diem interest to account for the time between when you request the payoff and when the payment clears. Fees. Some loans include prepayment penalties or payoff statement fees. The