Q:

How do I write a payoff statement?

A:

Quick Answer

Write a loan payoff statement by creating a letter to the borrower explaining what outstanding debt he needs to pay to clear the full loan amount, as Net Credit suggests. The statement includes the principle amount, penalties, fees and interest required to pay the loan in full.

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Full Answer

Borrowers paying off a loan early may request a payoff statement from the lender, as Net Credit claims. The payoff statement applies to a specific payment date and provides the borrower with all of the information necessary to satisfy loan requirements. The lender applies the loan's interest rate up to the date listed, and a change in the payment date requires a new payoff statement. Typically, a borrower uses a lump-sum cash payment to satisfy the loan, or he uses a new loan to refinance and eliminate the original contract.

Some lenders charge a prepayment penalty to recover part of the lost interest payments on the loan, according to Net Credit. The lender may also apply fees for late charges, processing and other costs to the statement if they apply to the loan terms. Lenders must list all applicable charges on this document that apply to the agreed payoff date and must accurately describe all payment terms.

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