A document proving that a debtor has paid a debt in full and has been released from the obligation of debt.
How an Acquittance Letter Works
The acquittance letter's main purpose is to prove that the debtor has paid all the money owed to the lienholder or the lender. After the Aacquittance letter has been issued, it means there is no expectation of any other repayment. An acquittance letter is also sometimes known as discharge letters or satisfaction letters.
Mortgage lenders and banks send acquittance documents, along with other lenders, after the person who owed a sum of money finish making a debt's full payment. All types of debts can lead to an acquittance letter, including both revolving debt and installment debt.
Once the mortgagor makes, the final payment is when the mortgage lenders and banks issue an acquittance letter. This acts as a future reference when the homeowner needs to prove the property is freely owned. Also, it is good to note that the Acquittance letter is not only limited to mortgages only. Acquittance letters can be issued for non-revolving debts or other kinds of installments.
Example of an Acquittance Letter
Joan is a journalist with one of the best media groups in the country. However, Joan has wanted to move out of an apartment and buy a home. The property that Joan wants to buy is out of her price range right now, so she decides to apply for a mortgage until she fully pays for the house. The house goes for $500,000.
Joan and the seller of the house property agree on a monthly mortgage payment of $5000. This means that Joan will have to pay the mortgage for eight years and five months to own the house fully. After eight years and five months, Joan will have fully paid for the mortgage and will be handed an acquittance letter that proves her full payment and ownership of the property.
Types of Acquittance Letters
When it comes to debt, there are two basic types. They include revolving and installment. A debt that borrowers can take to purchase a big-ticket item like a home or a car is an installment debt. This type of debt can take personal loans where the borrower is handed a lump sum of cash.
An example of an installment debt is an auto loan. For instance, if Kevin bought a car from a dealer at $23,000. Kevin financed the car bought for five years. Also, he has a monthly payment of $385. Kevin will end up paying for the $23,000 car for a period of 5 years if he continues paying the monthly installments. It means that his monthly installments will remain similar until he pays all the loans.
The other type of debt is revolving debt. This kind of debt mainly deals with credit cards. It is called revolving debt because the monthly installments can change from one month to another. For instance, Jane has a Visa card and uses it to buy body lotion, fuel the car and go to the movies. For this month, Jane has a charger for $500. Jane gets a statement saying she owes $500 as the minimum payment. After Jane pays the balance in full, she uses the card again for glossaries that cost $70. On Jane's next balance, it will state $70 as the new charge.