What is a 10-Day Payoff, and How Does it Work?

A 10-day payoff tells you the total amount of money you need to fully pay off a loan within 10 days, including interest (the cost of borrowing) and any fees. Typically, you’ll request a 10-day payoff letter if you are paying off a loan early, refinancing or consolidating debt.

Keep reading to learn more about the 10-day payoff process, what’s included in a 10-day payoff letter and how to request one so that you can prepare ahead of time.

What is a 10-day payoff?

A 10-day payoff is a quote from a lender that tells you how much money you need to pay off a loan balance within a 10-day period.

It typically takes a lender around 10 days to process and close out your account, or for a new lender to pay off your existing loan in the case of a refinance. However, it’s not unusual for the process to take slightly more or less time. In this case, you may end up owing slightly more interest or receiving a refund if you overpaid the interest.¹

The 10-day payoff amount includes interest the loan will accrue in the upcoming 10-day period. Your current balance does not usually include this future interest. The 10-day payoff amount also includes any fees, like a prepayment penalty — a fee some lenders charge for paying off your loan before the agreed-upon loan term is up.² You can check your original loan paperwork to see if the lender charges a prepayment penalty, and if so, how much it is. OneMain never charges prepayment penalties, so customers are better empowered to take control of their finances and do what works best for them.

What is a 10-day payoff letter?

To get started with paying off your loan in full, you’ll need to request a 10-day payoff letter from your new lender. A 10-day payoff letter, sometimes called a 10-day payoff statement, is a document that a lender sends you that states the amount needed to pay off a loan in full, including interest and fees, for the next 10 days. If you are refinancing a loan, your new lender will likely request the letter for you.³ A 10-day payoff letter contains important information about your account and instructions for how to pay off your loan,⁴ including the following:

• Your loan account number
• The exact payment amount due for the next 10 days, including your outstanding balance, interest, fees and a prepayment penalty (if your lender charges one)
• The date your payoff is due
• How to make the payment and where to send the money
• The adjustment amount (how much you will owe or be refunded if your payment is processed before or after the payoff date)

10-day payoff letters may include slightly different information depending on the lender and the type of loan.

When you might need a 10-day payoff letter

There are three common scenarios when you may need a 10-day payoff letter: if you’re paying off a loan early, if you’re refinancing an existing loan or if you’re consolidating debt. You might request a payoff letter for several types of loans,⁵ including:

• Personal loans
• Auto loans
• Student loans
• Mortgages

You’re paying off a loan early

If your financial situation has changed, you may be able to pay off a loan earlier than expected. For instance, let’s say you get a bonus at work that allows you to cover the remaining amount on your car loan using a lump sum payment. You might decide to pay off the loan early, so you pay less interest. Request a 10-day payoff letter so you know exactly how much you owe. Don’t forget to check whether the loan has a prepayment penalty, so you can weigh the interest savings against any potential costs.

You’re refinancing an existing loan

Refinancing involves getting a new loan with different terms and using it to pay off your original loan. Once the original loan is paid off, you’ll begin making payments on the new loan.

You may decide to refinance an existing loan to get a lower interest rate, a lower monthly payment, additional funds, or a shorter or longer repayment term. For example, if federal interest rates have gone down since you took out a loan, you may wish to refinance so you can pay less in interest.⁶

When you refinance, your lender will request a 10-day payoff letter for you.⁷

You’re using a loan to consolidate debt

A debt consolidation loan is a personal loan you use to pay off multiple debts, ideally with a lower interest rate. Consolidating debt with a personal loan may allow you to combine several high-interest debts into a single, more manageable monthly payment. With a clear payoff date and a predictable monthly payment, a debt consolidation loan could be a useful tool for getting out of debt.

When you’re approved for a debt consolidation loan, the lender will typically request a 10-day payoff letter from your existing lender or lenders. You’ll either get a lump sum that you can use to pay off your existing debt, or the debt consolidation loan lender will pay your creditors directly. You’ll then make payments to the lender until the loan is paid.

How is a 10-day payoff amount calculated?

To confirm that the numbers are correct once you receive your payoff letter, you can calculate a rough estimate for your 10-day payoff amount. You’ll need a few pieces of information⁸ to estimate the payoff amount:

• The current balance (the amount you currently owe)
• The interest rate of the loan
• Any other fees, such as a processing fee or a prepayment penalty

The formula you’ll use is: 10-day payoff = Annual interest rate / 365 x current balance x 10 + current balance

Here’s an example: You plan to pay off a $25,000 auto loan within 10 days. You have $5,000 left of the principal to repay, and your interest rate is 14%. You may calculate the interest for the next 10 days as follows: 14% or 0.14 (annual interest rate) / 365 (days in one year) = 0.000383 (daily interest rate) 0.000383 x 5,000 (current balance) = $1.915 (daily interest amount on your loan) $1.915 x 10 (days to pay off the loan) = $19.15 (interest for 10 days)

If there are no additional fees, the total 10-day payoff amount would be $5,000 + $19.15 = $5,019.15

How to get a 10-day payoff letter and pay off your loan

If you’re consolidating debt or refinancing, your new lender will likely request the payoff letter from your current lender and pay off the old loan directly. Check with your new lender if you’re not sure on their process.⁹

If you’re paying off a loan early, you’ll need to take the following steps to request a payoff letter yourself:

1. Request a 10-day payoff letter by calling your lender, going to their website or logging into their app. If you aren’t sure where to find this option online, email or call and speak with a representative.
2. Let your lender know the date when you intend to pay off the loan.
3. Ask for the payoff amount from your lender. Request a letter confirming your payoff amount to be sent either by email or mail.¹⁰
4. Once you receive the payoff letter, follow the instructions to complete your payment. Double-check the payment instructions, and be sure you send the payment to the correct person and address so that it doesn’t get lost in transit. Keep a copy of the letter and the payment document, like a check or receipt, to prove the transaction occurred.

What happens after the 10-day payoff?

Your payoff will be considered complete when the balance of your account is $0 or marked as paid in full. You should receive another letter from your lender officially stating that your loan has been fully paid. Keep a copy of this letter in case you need to confirm the payoff in the future.¹¹

By paying off your loan in full, you’ve reached the end of the road for your loan — hopefully you’ll be able to enjoy having some extra room in your budget going forward. If you are refinancing your loan or consolidating your debt, your lender should pay it off within 10 days, and then you’ll start repaying your new loan.

If you have a secured loan, which is backed with collateral, or something of value you possess, like a car, the lender will release the lien, or the legal claim to the property, once the loan is paid off.¹²

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Close the chapter on your loan

Understanding how a 10-day payoff works helps you stay organized, avoid extra interest, and close your account smoothly. Whether you’re refinancing, consolidating or making that final payment, a 10-day payoff letter can ensure you pay off your loan with confidence.

Sources

1, 11 https://edfinancial.studentaid.gov/loan-payoff-information
2 https://www.consumerfinance.gov/ask-cfpb/what-is-a-payoff-amount-and-is-it-the-same-as-my-current-balance-en-205
3, 4, 5, 7, 8, 9, 10 https://www.thebalancemoney.com/payoff-letter-basics-315691
6 https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage
12 https://www.fdic.gov/bank-failures/obtaining-lien-release