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Your 10-Day Payoff From Start to Finish: A Quick Guide

Your 10-Day Payoff From Start to Finish: A Quick Guide

Getting your 10-day payoff statement is an important step in refinancing your student loans. Here’s why: When you get approved for a refinance, your new lender pays off your old loans. That doesn’t happen instantaneously, though – the loan payoff takes at least 10 days. And it can take 1-3 weeks after that for the payment to be fully processed.

This can be tricky, since loan interest accrues daily. Getting a 10-day payoff letter ensures your new lender sends enough money to your old lender, and you’re not left with an outstanding balance at the end of your refinance. Here’s how the 10-day payoff works, along with simple steps to make your refinance go as smoothly as possible.

What is a 10-day payoff?

A 10-day payoff refers to the time it takes for your new lender to pay off your old loans during a refinance. This happens with any loan you refinance, whether that’s a home loan, auto loan, personal loan, or student loan with Earnest. Sometimes a loan payoff takes a little more than 10 days, but this is a standard process you’ll find with many kinds of refinancing, including loans obtained through a bank or credit union.

Interest accrues on your student loan balance every day. That means you can’t just send in the total amount listed as your current balance on your monthly statement or on your online account. Instead, you have to get a 10-day payoff estimate from your current lender, which includes the amount you owe, as well as any interest that might accrue on the principal balance in the next 10 days.

You’ll need to provide the 10-day payoff letter to your new lender so they know the exact amount to send to repay your student loan balance in full. Keep in mind, education loans don’t come with prepayment penalties, so you don’t have to worry about using a new loan to pay off an old one early.

How to calculate your 10-day payoff amount

The amount due in your 10-day payoff is the current loan amount from your old servicer—that includes the principal balance and interest accrued up until today—plus interest that accrues over the next 10 days. That amount could add up quickly, especially if your loan has a high interest rate. Each loan you’re refinancing will have its own 10-day payoff amount. Here’s how it’s calculated:

Payoff amount = Current loan amount + interest on the principal for next 10 days

The calculation is based on calendar days, not business days, so if your loan servicer requires you to calculate it yourself, be sure to select the right dates. You will need this information for the new lender you are refinancing with.

10 day payoff

How to get your 10-day payoff letter

You’ll need to request a 10-day payoff letter from your current loan servicer, which you may be able to do online. Not all lenders offer an online request option, however, so you may need to call or email your loan servicer directly to get this information.

Typically, a 10-day payoff letter includes:

  • The 10-day payoff date and payoff quote for your loan
  • Your loan account number(s)
  • Individual loans and their payoff amounts (if you’re refinancing multiple loans)
  • Instructions on how to pay off your current loan servicer

If you’re refinancing multiple loans, you need to ask each lender for a 10-day payoff letter. For instance, if you have five loans you’re refinancing, you’ll have to request a 10-day payoff letter from each of your five loan servicers. Depending on the lender, you may be able to get these letters by mail or email.

Information you’ll need for your 10-day payoff

Be sure to confirm the information below before signing your loan agreement:

Payment address versus correspondence address

When you look at your billing statement, you may see a few addresses listed in the contact information. Checks can only be processed at the payment or payoff address for your servicer, so be sure you’re providing that address and not the correspondence address.

Note: If you have private student loans and federal loans with the same servicer, they may have different addresses.

Specific payoff amount for each loan

If you’re paying off some but not all of your existing loans, you’ll need the 10-day payoff quote for just the specific loans that you’re paying off. You may need to call your servicer to get this amount if it’s not broken down by individual loan on your statement.

Account number

Be sure to double-check your account number when you’re entering this information. A typo could mean a check is applied to another borrower’s account, or a delay — both of which you want to avoid. In some instances, you may also be asked to provide the last four digits of your Social Security number to verify your identity.

Sometimes it’s difficult to find this information. If there’s any doubt, call your servicer directly to confirm. The better the information they get up front, the easier the payoff process is.

Loan number

You may also need to provide your new lender with your loan number, which is different from your account number. If you’re refinancing more than one loan, you’ll need to provide the loan numbers for each one. Again, if you’re paying off some but not all of your student loans, let your lender know to avoid confusion.

After you send your 10-day payoff letter

The amount of time it takes to refinance your student loans may vary depending on the lenders you’re working with and the accuracy of the information you’ve provided. Generally speaking, here’s the approximate timeline you can expect:

Day 0: Sign your loan agreement

Once you’ve obtained your 10-day payoff amount(s) and provided the information to your new lender, be sure to sign your loan agreement on the same day. If you sign on another day, then you’ll need to re-check the amounts and update your 10-day payoff balances before signing so you can ensure your loan gets paid in full. Be sure to read any disclosures carefully.

Day 1-3: Wait for the cooling period to elapse

Now your lender must wait three business days (this excludes weekends and Federal holidays) by law before sending your payoff checks. This is known as a cooling period and it is a time where you have the right to cancel your new loan.

Day 4: Your new lender sends payment to your old servicers

Once this legal holding period is over, your lender will send a check (or checks) via mail or electronic transfer to your current servicer(s).

Many servicers accept electronic transfers, which reduces potential issues. If your previous servicer does not accept electronic transfers, the check is sent through the mail with the instructions you provided about which specific loans to apply the funds to. Your loan is active with your current servicer until they receive payoff from your new lender and the payment is fully processed. In most cases, interest will begin to accrue as soon as you take out your new loan.

Day 10: Your old loans are closed

Once the check from your new lender is received and the payment is fully processed, your old loans are closed. If you’re an Earnest customer, you’ll get an email stating that your loan is active. If you have multiple loans, interest only accrues on the payoffs that we’ve confirmed have been received.

Always check in with your previous servicer and continue making on-time payments until your loan account shows a zero balance.

Sometimes your loan payment check is processed early or late by your servicer, which could leave you with a small balance or negative amount on your account.

The timing of the payoffs doesn’t always match up to exactly 10 days. If you see a negative balance in your account, it’s probably because you had a payment scheduled to your old lender between the time you submitted your 10-day payoff information to your new lender and it was fully processed. When this happens, the payment will either go to your new lender or back to you. It can sometimes take four to six weeks for this payment to arrive.

If Earnest receives an overpayment, we apply that to the principal balance of your Earnest loan as of the date we received it. If you receive the refund and you want it applied directly to the principal balance of your Earnest loan, you can do so by scheduling a manual payment for the exact amount. Upload a copy of the check to your Earnest dashboard under My Profile > Uploads, and let us know by sending a quick email.

Lastly, if there is a remaining balance on your old loan, we’ll ask you to submit repayment to your servicer directly.

Find out how much you can save with Earnest

If you’re ready to refinance your student loans, getting a 10-day payoff letter is a critical part of the process. Now that you know how it works and what to do, your next step is comparing your options to see how much you could save.

Favorable loan terms can mean a lower interest rate and monthly payment. We’ve helped thousands of grads simplify their lives and pay less interest on their student loans. Want to see how much you could save with Earnest? Get a free rate check in less than 2 minutes.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.