What Is a Loan Payoff Letter?
A Loan Payoff Letter is a document that contains detailed information related to a loan and instructions on how to pay it off. A lender should compose such a letter and provide it to their debtor.
These letters can be used with nearly every kind of loan, including auto loans, mortgages, and student loans. A Personal Loan Payoff Letter informs the recipient about the details of payment of the debtor's personal loan.
Loan Payoff Letters for student or auto loans can be required by mortgage lenders when an applicant applies for a mortgage on a new house. Providing such a letter allows mortgage lenders to assess how much of the applicant's income is used to repay existing loans.
The debtor can make a Loan Payoff Letter request not only at the beginning of payments but also after the final repayment of the loan. This letter can be helpful if the owner of a vehicle has just paid a loan for it and decided to sell this vehicle. The seller needs time to obtain the release of lien, replace the title, and to receive the confirmation of ownership. A Loan Payoff Letter can confirm the absence of a loan on a vehicle and facilitate the transaction.
How to Get a Loan Payoff Letter?
The debtor who needs to get a Loan Payoff Letter should request it from their lender. For this purpose, it is necessary to call or write to customer service. Some lenders provide their clients with an automated online system that allows making an online request. Usually, the debtor receives their Loan Payoff Letter within 6-10 business days.
How to Write a Loan Payoff Letter?
A Loan Payoff Letter usually contains the following:
- The debt amount and interest charges of the creditor should be indicated;
- Include the period of loan repayment and payment expiration date;
- Indicate the options for paying off the debt and acceptable payment methods;
- Provide all necessary details and bank requisites for sending the payment;
- Indicate additional charges due, such as outstanding fines or account closing fees;
- Provide an adjustment amount when the debtor pays before or after the expected payment date.
When a loan is paid off, the lender should compose a Loan Payoff Letter that contains proof that the payment was made in full, the account is closed, and there is no additional liability of the debtor.
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