How Acquittance Works

A creditor—a bank, lender, mortgage lender, etc.—issues acquittances when the debtor has fulfilled their debt obligations. This is done when the debtor pays the creditor the total amount they owe them. The acquittance letter acts as official proof of this.

You may have heard acquittance letters called letters of satisfaction or discharge letters. These letters are used in revolving and installment debt, though they are most common in mortgage situations. Revolving debt is associated with credit cards. You spend on credit and then pay it off as you go. Installment debt is debt you pay according to a schedule and at a predetermined rate. For example, you pay down your car loan every month at $250.

Acquittance letters are useful for presenting to lenders when you are seeking out a mortgage or other type of loan. The letter shows that you are capable of repaying debt in full.

Example of Acquittance

Mary has a credit card and student loan. Every month, she has to pay $300 towards her student loans, which leaves her a little short on funds from time to time. Unfortunately, she couldn’t refinance her student loans, and so her monthly installments remain high. Because of this, she uses her credit card to pay for groceries. She buys enough groceries to get her through the week so she can immediately pay off what she put on her credit card when she gets paid. The good news is that this revolving debt is great for her credit.

After three years, Mary managed to completely pay off her student debt—it turns out the high payments worked out in her favor. The lender issued her an acquittance letter. The letter uses legal language and is about four pages long. It states the parties involved in the debt when the creditor issued the debt, the account number, and any debt discharge provisions.

Between the letter and her great credit from her revolving debt, Mary can now save for a home. She will bring her acquittance letter with her when she goes to get pre-approved for a mortgage.

Acquittance vs. Acquit

Whereas acquittance is proof that a debtor no longer owes a debt, acquit is to find someone not guilty. Both terms mean to set someone free of something but acquit pertains more to court situations and rulings. Acquit, in its first meaning, however, means to satisfy a debt. So it is not incorrect to use this term when a lender frees you of your debt or you settle your own debts.

Acquittance vs. Acquaintance

Acquittance and acquaintance are confused often because of similar spellings—and, therefore, spelling errors. An acquaintance is something or someone you are slightly familiar with. When it comes to acquittance, you’re more than acquaintances with your debt.

Significance of Acquittance

Outside of the satisfaction of paying off debt, an acquittance is an official acknowledgment from the creditor that you have paid off the debt in full. You can use this letter for future loans or frame it—because paying off debt is a major accomplishment.