How to Calculate a Loan Payoff
A loan payoff is the amount you pay at any given time to retire an installment loan or debt. Depending on the kind of loan, this information can be easily obtained from the Web page for your loan, if your bank provides online banking and account monitoring. You can also calculate the value of your loan payoff using the following steps.
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Things You'll Need
- Copy of your latest account statement or online access to your account
- Financial calculator
Instructions
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Prepare an amortization schedule, which is a list of monthly payments detailing how much goes toward principal and interest for the life of the loan. The easiest way to prepare an amortization schedule is to use an online calculator or a spreadsheet template. To do this, you will need the original amount borrowed, the length of the loan, when the loan was made and the interest rate.
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Determine how much has been paid, the current principal balance and when you want to pay it off. This information can be obtained from your latest account statement. You can also calculate your principal balance by subtracting principal already paid (use the amortization schedule) from the original amount borrowed.
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Adjust for prepayment penalties, late payments and fees if applicable. Some loans have penalties attached for early payoffs. If you have this type of loan, you will need to calculate the amount based on your original loan agreement. Also, if you have any outstanding fees, make necessary adjustments.
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Calculate your payoff amount. Add any prepayment penalty and applicable fees to the principal balance on the date you plan to pay off the loan. This is your payoff amount.
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Go the easy way and obtain this information from your bank. You can call your lender's customer service department and get the payoff amount for a particular date. In some cases, this information may be available online. However, you most likely will only be able to get a payoff amount at the time you check and not for a future date.
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