Demystifying the Payoff Statement

by MPOWER Financing | In Guides and Tools | 26 December 2023 | Updated on: December 26th, 2023

If you’re contemplating refinancing your international education loan for more favorable terms, your current loan servicer will require a “payoff statement” – also referred to as a “payoff quote,” “payoff letter,” “settlement letter” as well as “foreclosure letter.” 

Let’s unravel the mysteries of the payoff statement and its significance.

What is a payoff statement?

A payoff statement is a document delineating the complete amount necessary to settle your student loan debt in full including:

    • A payoff amount: This is the sum required to entirely settle your student loan debt. It includes the principal balance (the initial amount borrowed plus any accrued interest) and any interest and penalties accumulated since your last payment.
    • A good-until date: This is the deadline until which the payoff amount is applicable. Most of the lenders give a table with the daily expected outstanding loan amount. Please ensure that your letter is valid for 15 days from submission date.
    • Account details: Your original loan provider should include details of the account to which you or your prospective refinancer should put money in to close the original loan account, i.e. account number, branch, etc. 

When is a payoff statement needed?

There are multiple scenarios where a payoff statement is required:

    • Early student loan repayment: If you intend to settle your student loans ahead of schedule, acquire a payoff statement to ensure the entire payment is made without any residual interest for the subsequent month.
    • Student loan refinancing: During the process of refinancing your student loans, your new lender may necessitate a payoff statement from your existing lender to verify the precise amount required to clear the debt.

How to acquire a payoff statement?

To secure a payoff statement, you can either retrieve it from your lender’s online portal or contact your lender to request a copy. We have listed a few lenders and their processes here to help.

Prodigy Finance (US): Here is a quick guide on how to settle/close off your loan with Prodigy Finance. 

Public sector banks (India): For PSBs like State Bank of India (SBI) and Bank of Baroda (BoB), you need to reach out to your home branch for a letter from the branch manager. Typically these banks have a standard template for home loan refinancing which they modify for your education loan.

Private lenders (India): With all Indian private banks as well as Non-Banking Financial Companies (NBFCs), you need to reach out to their central support team asking for “foreclosure statements.” Here’s the contact information for common private lenders in India to help you get started: 

For U.S. federal student loans, visit your loan servicer’s website or contact them directly. 

Why refinance your student loan?

If you have the opportunity to gain better loan terms with a new lender , it can yield several advantages:

    • Interest reduction: You may reduce the amount you pay in the long term by preventing the accumulation of additional interest.
    • Monthly budget liberation: You may reduce your monthly loan payment which will  increase your disposable income.
    • Selective tax benefits: You may qualify for tax benefits by moving your loan to the country where you work.
    • Building credit history through timely repayment:. Since your credit history does not always move with you across borders, you should plan to build a credit history where you intend to spend a significant part of your career.

Closing thoughts

Actively managing your student loans is a crucial component of your financial journey. Securing a payoff statement is a vital step if you are contemplating early loan repayment, loan refinancing or purchasing a residence. Remember to evaluate multiple lenders if you are considering refinancing your student loans and bear in mind that you may forfeit federal safeguards such as income-based repayment plans and student loan forgiveness programs.

Once again, congratulations, and best wishes on your financial journey!

What’s next?

Apply with MPOWER to refinance your international student loan at refinance.mpowerfinancing.com

If you have already started with your application, track and upload the documents on our dashboard

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