Get all of the terms and other information. A payoff statement should include the name and address of the lender preparing the statement and be addressed to the lender that requested the payoff. It also needs to include the customer’s name, the loan number and the terms of the loan, including the balance and the interest rate.
Complete the body of the letter. This will indicate what the payoff figure is and for how long that figure is good. The statement should also include a per diem figure, which can be used to calculate a new payoff figure if the due date for the payoff expires. You can use the per diem figure to add how much interest accrues each day after the expiration of the original payoff date. The letter should also indicate what date interest has been paid up to.
Calculate the payoff. For example, here’s how to calculate the payoff on a loan with a balance of $15,000 at 8 percent interest on which the last payment was received 25 days ago (in this example, Jan. 31). The payoff figure is needed for Feb. 25. Take 8 percent (.08) and divide it by 360 (many loans are calculated on a 360-day year). Multiply the resulting figure by 25 (the number of days from the most recent payment to the payoff date), then multiply the result by 15,000 (the balance of the loan). The amount of interest is $83.33 for the 25 days. Add this to the balance of $15,000 to get the payoff balance of $15,083.33.
Include a per diem, which is the amount of interest that accrues per day. Take the interest of $83.33 and divide it by 25 for a per diem figure of $3.33. If the payoff amount is good through Feb. 25, add $3.33 for every day after Feb. 25 until the payoff is received.
Provide a breakdown. The payoff statement should include a breakdown of any fees, interest due and the principal balance, as well as an explanation of per diem charges that will be incurred if the check is received after the due date. In addition, the statement should indicate to whom the check should be payable.