Payoff Statement
Last updated October 1, 2026
A payoff statement, also called a payoff quote or payoff letter, tells a borrower the exact amount needed to pay a loan in full on a given date. It is not the balance on the last statement. A payoff figure adds everything owed through the payoff date: unpaid principal, interest that has built up since the last payment, unpaid fees and any prepayment penalty. It then subtracts credits the agreement allows, such as an escrow account balance.
Because interest grows every day, a payoff quote is "good through" a set date and shows a per diem, or daily interest amount, for each day after.
Example: A loan has $100,000 of principal at 9% interest. Using a 360-day year, which is common for business loans, daily interest is $100,000 × 9% ÷ 360 = $25. If the last payment covered interest through June 1 and the payoff date is June 21, accrued interest is 20 days × $25 = $500. Add a $250 payoff fee and the quote is $100,750, good through June 21, plus $25 for each extra day.
In the US, home loans have a firm deadline. Regulation Z requires the servicer of a consumer loan secured by a home to send an accurate payoff statement within seven business days of a written request. Business loans follow the loan agreement.
Why it matters for lenders
Payoffs are where small errors become real money. If the quote leaves out a fee or uses the wrong interest method, the lender either writes off the gap or has to refund an overcharge. If a wire arrives a day late and the quote had no per diem, a small balance stays open and the file cannot close.
Payoffs also start legal steps. Once the loan is paid, the lender must release its lien, such as a mortgage or a UCC-1 filing under the Uniform Commercial Code, within the time state law or the contract sets.
How it works in practice
A title company asks for a payoff on a bridge loan closing on the 15th. The servicer checks for any recent ACH (electronic bank) payment that could still be returned, confirms fees and prepayment terms, and generates a quote good through the 15th with the daily amount. A second person reviews it.
The wire arrives on the 16th. Because the quote showed the per diem, the title company added one day of interest and the loan closes at zero. The servicer marks it paid, refunds any escrow balance and starts the lien release.
In spreadsheets, staff re-key balances, forget fees or miss a payment that bounced after the quote. Building the quote from the live loan record avoids those gaps.
Related terms
Prepayment Penalty
A fee a borrower pays for paying off all or part of a loan before it is due. It makes up for the interest the lender expected to earn. Common commercial structures include a step-down percentage that falls each year, yield maintenance tied to Treasury rates, and defeasance. The loan documents set when the penalty applies and how it is calculated.
Escrow Account
An escrow account holds money a lender or servicer collects from the borrower to pay bills tied to the loan, most often property taxes and insurance. The borrower adds a monthly amount to each payment, and the servicer pays the bills when they come due. It protects the collateral from tax liens and lapsed coverage.
Lien
A legal claim on property that secures payment of a debt. A lender with a lien can take and sell the property if the debt is not paid, and the lien stays attached until the debt is paid and the lien is released. Liens can come from an agreement, such as a mortgage, or from law, such as a tax or mechanic's lien.
Loan Servicing
Everything a lender or servicer does to manage a loan after it closes, until it is paid off or written off. That includes billing, collecting and posting payments, handling escrow, sending statements, watching covenants and insurance, managing late payments and changes, and producing payoff figures. Servicing can be done in-house or by a third-party servicer.
UCC-1 Filing
A public notice, called a financing statement, that a lender files with a state office to record its claim on a borrower's business assets. Filing a UCC-1 is the usual way to perfect a security interest, which sets the lender's priority over later creditors. In most states a UCC-1 lasts five years unless the lender files a continuation.
Further reading
See how lenders put this into practice
FUNDINGO runs origination, servicing and reporting on one loan record inside Salesforce.