What the payoff figure includes
The lender takes the principal balance and adds interest for each day since your last payment. That is why a payoff quote is higher than the balance on your statement.
If the contract has a prepayment penalty, it is added too. Most consumer vehicle loans do not, but check the agreement.
Worked example
A £12,000 balance at 9% accrues £2.96 a day. After 15 days the accrued interest is £44.38, so the payoff is £12,044.38.
Making the 36 remaining payments would cost £13,737.48. Settling now avoids £1,693.10 of interest, and with no penalty that is the net saving.
Before you pay it off
Ask for a written payoff quote valid through the date you will pay, and confirm how the payment must be sent. Interest continues to accrue until the money clears.
Check that the lender will report the account as paid in full, and keep the confirmation for your records.
Inputs for the bike loan foreclosure calculator
Principal balance
The principal left after your last payment.
Interest rate (APR)
The rate on your agreement.
Payments left
How many monthly payments you would still make.
Days since your last payment
Interest builds up each day from the last payment until the payoff arrives.
Daily interest basis
Most consumer loans divide the yearly rate by 365; some use 360.
Prepayment penalty
Check the contract. Most personal vehicle loans have none.
CALCULATOR QUESTIONS
Bike loan foreclosure calculator questions
What is the payoff on a £12,000 bike loan?
£12,044.38 after 15 days at 9%, including £44.38 of accrued interest.
How much interest do I avoid?
In the example, £1,693.10 by settling instead of making the 36 remaining payments.
Is there a penalty for paying early?
Usually not on consumer vehicle loans, but check the agreement. The calculator lets you add one.
Why does the payoff change daily?
Interest accrues every day, so the figure rises until the lender receives the money.