The payoff amount is the total sum required to completely close out a loan. It's different from your current balance because it includes any interest that has accrued since your last payment, plus any potential fees. This calculator focuses on calculating the principal and accrued interest.

Your "remaining balance" or "principal balance" is the amount you still owe on the loan's principal. However, interest on a loan accrues daily (this is called "per diem" interest). When you request a payoff quote for a future date, the lender calculates the principal balance on that date and adds all the interest that will have accumulated up to that day.

Per diem (Latin for "per day") interest is the amount of interest your loan accrues each day. It's calculated by taking your annual interest rate, dividing it by 365, and multiplying that by your current principal balance. This calculator uses this concept to determine the precise payoff amount on your chosen date.

Every dollar you pay towards your principal is a dollar that no longer accrues interest for the rest of the loan's life. By paying off the loan before the full term, you avoid all the future interest payments you would have made. The earlier you pay it off, the more you save.