Payoff quotes are an integral part of lending. Most customers need a payoff quote from a previous lender before opening a new loan for another purchase, such as a loan for a newer car. They need the payoff quote, so the new lending institution can send a payoff amount; or the customer can pay off that amount themselves before opening the new loan.
Payoff quotes, sometimes referred to as 10-day payoff quotes, establish how much is needed to pay off the loan balance and close out the loan.
The payoff amount is rarely the same as the principal balance remaining on the loan. The payoff quote considers any rebated precomputed interest or fees, rebated insurance policies, and any unaccrued interest/finance charges as of the determined payoff date.
Some institutions provide a payoff quote online to their borrowers. Other institutions require the borrower to contact the institution for the payoff quote, and then a loan officer prints the payoff quote and sends it to the borrower via mail. They can also print it to a PDF and attach it an email and send it to the borrower.
Locking in a Payoff
To lock in a payoff indicates the borrower is ready to pay off the loan. Locking a loan for payoff halts the loan from any further activity other than the payoff payment, such as accruing any more interest (as of the payoff effective date); amortizing any additional fees/costs; and accruing any late charges, should the loan qualify for a late charge from the date the loan is locked to the payoff date.
Locking a loan is simple:
- Once in CIM GOLD with the account selected for which you want to lock in a payoff, go to the Loans > Payoff screen.
- Enter the date the borrower plans to pay off the loan in the Effective Payoff Date field, then click RECALC.
- Click LOCK.
The Effective Payoff Date (also known as the Expire Date) determines when you want the lock on the loan to expire or drop, should the final payoff amount not be made during the time the loan was locked and the Expire Date. Users can extend the Effective Payoff Date to any date in the future; however, most institutions choose to drop the lock within 10 days. If the loan is not paid off in that amount of time, a new payoff quote should be generated, because additional accrued interest may make a big difference in the new payoff amount and date. (For current GOLDPoint Systems’ clients, institution option DPON (Unlock and drop payoff record nightly) is available that will drop the payoff lock every night, regardless of what the Expire Date is.)
Once the payoff lock is dropped, the account continues with normal activity. Customers don’t have to make the final payment in the amount of time of the payoff quote. It’s simply a way to understand the full payoff amount. There is no penalty for not making a final payoff payment by the Effective Payoff Date. Payoff quotes do not affect credit in any way.
Payoff quotes can be generated before or after locking in the loan for payoff. However, if you lock the loan before generating a payoff quote to send to the borrower, and the Payoff Effective Date is far enough in the future that the account would earn a late charge should a payment not be made by the Due Date + Grace Days, the future late charges will not be included. But if you do not lock the loan for payoff, and the quote is generated in the future when late charges would apply, the quote will include those late charges. The Payoff screen will also display a message notifying the user that late charges are included in the payoff quote, as shown below:
Customer Quote vs. Detailed Quote
A Customer Quote is one that can be sent to the borrower via an email attachment or through the mail (in an addressed envelope). It can include a personalized message at the bottom of the quote. To enter a personalized message, use the Mail & Comments tab of the Payoff screen to enter the message, as shown below:
A Detailed Quote can also be sent to the borrower, but it isn’t as personable. It basically only shows the monetary details of the payoff, as shown below:
Both types of quote can be generated from the Loans > Payoff screen by clicking the applicable buttons at the bottom of the screen.
Quote to Comments
Another cool feature on the Payoff screen is that you can send the payoff quote to the Collection Comments list-view table on the Loans > Marketing and Collections screen > Contact tab. Collection Comments are an integral part of understanding communication and activity that has transpired on an account between your employees and the borrower.
Many institutions use the Collection Comments as a record-keeping tool that can be helpful in tracing efforts to collect debt, should that record be needed for any reason, such as bankruptcy court proceedings or future lending with that borrower.
Click the QUOTE TO COMMENT button to send a record of the payoff quote to the Collection Comments. You’ll need to train your employees when to do that. For example, if a borrower is just curious about their payoff amount, sending the quote to comments may not be needed.
The following is an example of what the payoff quote looks like in Collection Comments: