For some loans, lenders "precompute" the interest. That is, they compute the amount of interest that will accrue based on the entire loan amount. That interest becomes part of the amount you owe. With this kind of loan, you are contractually obligated to repay the principal plus all the precomputed interest. However, you should receive a rebate of the portion of interest you paid that is considered "unearned," or this unearned amount should be deducted when your payoff amount is calculated. Under this method, when you pay off your loan early, even if each payment is made on the due date or within any grace period, you usually will have paid more interest than under the other methods described in this section. This "overpayment" results because the lender earns the interest faster, so that less of each payment during the earlier months of your loan reduces your principal balance. Therefore, your early payoff will be higher than under the other methods, assuming that you make all payments on time.