What is a 10 day loan payoff? This is something you should know if you are refinancing your student loans.
Look, when you are approved for a refinancing loan, a short time elapses before your old loans are repaid by the new lender. You need to make sure your old loan is paid off in full – and with interest rates rising every day, this can be trickier than it sounds.
Your 10 day loan payoff letter is crucial to ensuring that your new lender sends you the correct amount so that there is no outstanding loan balance at the end of the refinancing process. Here’s what you need to know about how a 10-day loan payoff works and why it’s so important.
What is a 10 day loan payoff?
When you owe money on student loans, interest is accrued on these loans every day. So if you want to pay your balance in full, you can’t just send the balance of the last statement or even the total amount owed displayed in your online account.
Instead, you should get a 10 day loan payoff estimate from your current lender. You can log into your online loan account to request a 10 day loan payoff letter, and your loan manager will tell you the 10 day loan payoff amount. This value is equal to:
- The current balance of your loan
- + Any accrued interest on the principal balance over the next 10 days
During the refinancing process, you must provide the 10 day loan payoff letter to your new loan manager. This letter will determine the exact amount that will be sent to fully repay your current student loan debt.
How 10 Day Loan Payoff Works?
When refinancing a loan, the current lender is usually exchanged for a new one. When this happens, the new lender is responsible for paying the old lender the loan balance. This usually takes a few days, partly because there is a cooling-off period of three days in which you can cancel the refinancing. During this period, the interest on the loan continues to rise.
After this cooling-off period, the new lender is ready to repay the loan to the old one. Before they get started, they need to know the exact balance of the loan, and calculating it can take some time.
Why is this called a 10 day loan payoff?
When the new lender sends the final loan payoff check to the old lender, the amount sent is known as a “10 day loan payoff.” This name refers to the fact that it often takes 10 days for the refinancing to be completed. The payoff amount of the 10-day loan will be different from what is currently on the loan as it includes any future interest.
Request a 10-day loan payoff letter?
Most student loan lenders allow you to request a 10-day payment by logging into your account online. But not everyone does, so you may need to call or email your loan officer. If you need to request a 10-day loan payoff directly from your creditor, you’ll need to provide some basic information, including:
- Your loan number
- The address to which the 10-day refund letter should be sent
You must ask any loan agent that you have the 10-day loan payoff amount. This means that if you have six loans that you are refinancing, you should get a 10-day loan payoff letter from each of the six lenders.
The 10-day payout is calculated on a calendar day basis; it is not based on business days. In some cases, you will need to provide the dates to your lender. Make sure you calculate correctly so that your loan manager will give you the exact loan payoff amount.
What Is The Loan Refinancing Schedule After You Get Your 10 Day Loan Payoff?
When you refinance your student loans, the schedule may vary slightly depending on which lender you work with. In general, this is how the process works.
- Day 0: You receive your 10-day payment letter and sign your loan agreement with your refinancing lender on the same day. If you request the 10-day loan payoff amount too early, you may receive an incorrect amount and you will need to receive another updated letter to guarantee full loan payoff of your student loan.
- Days 1-3: There is a legally required cooling-off period of one to three days. During that time you have the option to cancel your refinancing loan.
- Day 4: Your refinance lender sends payment on your existing loans to your loan officer. The amount sent is based on the 10-day loan payoff letter you provided to your lender.
- Day 10: On the 10th, your old creditor should receive payment from the new creditor and your old account will close. Your new loan manager will tell you exactly when your new loan becomes active and when payment is due.
- You must contact your existing loan officer and ensure that the loan balance reads $0 upon completion of this process. Don’t stop making payments or miss out on your existing loan loan payoffs until you’ve confirmed that the refinancing process has been completed and your old loans have been paid off in full.
How to find your final 10 day loan payoff amount
Your new lender will ask you to calculate the final 10-day loan payoff amount owed to the old lender. You should contact the old lender and ask what the amount will be. Since the interest accrues daily, the loan payoff amount is only needed for 10 days up to a certain point, which is known as “good to date”. After that date, the amount to be paid changes because the interest accrual is different.
Depending on the lender, you can contact them via email or online chat to find out the 10-day loan amount. Otherwise, you have to call and ask.
More information your lender needs
The new lender also needs to know the old lender’s account number. You can usually find this number on a monthly statement or official document. Be sure to provide this number accurately. If you enter the wrong number, it may take longer for the salary to appear on your account.
You may also need to provide your loan number, which is different from your account number. If you are refinancing multiple loans, you must provide each loan number to the new lender. If you are not refinancing student loans, report this to your new lender.
Creditors sometimes allow electronic payments, but many still use paper checks. If the old creditor only accepts checks, this means that the new creditor has to send the amount to be repaid by post. You are also responsible for locating and providing the mailing address of the former lender. Don’t assume it’s the same address you see on your bill or their website.
Contact them directly and ask for the correct address to send the refund amount to and then accurately pass this information on to the new lender.
If you enter the wrong address, your check may be lost. If this happens, the check must be voided. This will also likely result in another 10 day loan payoff amount, so you will have to call and get that amount again from the old lender.