Why is there a difference between the payoff amount and the principal balance?

The principal balance is the remaining amount you owe on the original loan, excluding interest. It’s the portion of the loan that represents the actual money you borrowed.

The payoff is the total amount you need to pay to fully settle the loan. It includes the principal balance, any accrued interest, and any fees that may be due. The payoff amount will also include interest that has accrued since your last payment, which is why it may be higher than the principal balance alone.

For example, if your principal balance is $2,000 and you’ve accumulated $50 in interest, the payoff would be $2,050.