Acquittance

What Is an Acquittance?

An acquittance is a document which shows that a debtor has been released from a debt obligation by paying it in full.

Understanding an Acquittance

Acquittance letters are often issued by a lender or lien holder as proof that the owed amount has been satisfied, and that no further repayment is expected or warranted. These are sometimes also known as letters of satisfaction or discharge letters.

Banks and other mortgage lenders issue an acquittance once a mortgagor makes the final payment on their mortgage. This document can be used in future transactions if the homeowner needs proof that the property is owned free and clear, or without financial encumbrance or liens.

However, these documents aren't just limited to mortgages. Many other installments, or non-revolving debts, provide notifications like an acquittance when they have been repaid.

What Is the Difference Between Installment Debt and Revolving Debt?

There are two basic types of issued debt: installment and revolving. An installment debt is usually the type of debt that a borrower takes on for a big-ticket purchase, such as a car or a home. They can also take the form of personal loans in which a borrower receives a lump sum of cash. In all cases, these are finite figures, with a monthly payment that goes towards paying down an existing balance.

Take an auto loan for example. John purchased a previously owned car at a dealership for $22,000. He financed that purchase over five years and has a monthly payment of $375. If John makes the minimum monthly payment each month, he will pay that $22,000 off in five years. His balance will not increase, and his payments will remain the same for the life of the loan. This is an installment debt.

A revolving debt is most commonly associated with credit cards. These are called revolving debts, both because the payment can change from month to month, and the balance of the debt can shrink and grow over time.

For example, take a Visa card. John uses his Visa to go to the movies, have the oil in his car changed, and to buy a plane ticket to see his sister out of state. John has charged $600 this month and his statement shows that he owes a minimum payment of $60. John decides to pay the balance in full, but then immediately uses the card again to buy concert tickets for $50. On his next statement his balance now only shows the $50 in new charges and a new minimum monthly payment of just $25. This is a revolving debt.