Certificate of Full Payment of Loan

What is a Certificate of Full Payment of Loan?

A Certificate of Full Payment of Loan is issued by a lender to certify that a loan has been repaid in full and that the debt is settled. This generally means that the borrower has finished paying the lender back the amount of money that was originally owed, plus any accrued interest, if applicable. This creates a written record that can be used as evidence that the debt was fully settled.

What is the difference between a Certificate of Full Payment of Loan and an Acknowledgment Receipt?

While both documents state that a payment of money is made, a Certificate of Full Payment of a Loan is issued by a lender to certify that a loan has been repaid in full and that the debt is settled, whereas an Acknowledgment Receipt is a simple document that acknowledges receipt of cash which may signify that a payment is made but does not necessarily mean that the whole amount of the money due has been fully paid. Further, a Certificate of Full Payment of a Loan pertains to the payment of money, while an Acknowledgment Receipt may pertain to the receipt not only of money but also of goods.

Is it mandatory to have a Certificate of Full Payment of Loan?

While there is no legal requirement that there be a Certificate of Full Payment of Loan for the full payment of a loan, it is better to have one to document that the loan has been fully paid. Further, this will protect the borrower as he can use a Certificate of Full Payment of Loan to prove that he has made full payment and that he has no further obligations to the lender under the loan agreement.

What must a Certificate of Full Payment of Loan contain?

A Certificate of Full Payment of Loan contains the following information:

• The details of the borrower,
• The details of the lender,
• The amount of debt that was fully paid, and
• The date when the loan agreement was entered into by the borrower and the lender.

What are the prerequisites of a Certificate of Full Payment of Loan?

The borrower must have fully paid the loan which includes the payment of the principal amount (or the money borrowed), interest, and penalties if there are any. After the lender has ensured that the borrower has made a full payment, a Certificate of Full Payment of Loan may be given to the borrower.

Note that a Certificate of Full Payment of Loan should not be used by the lender if the borrower has only made partial payment of the loan. If a partial payment is made, then an Acknowledgment Receipt should be used.

Who is involved in the Certificate of Full Payment of Loan?

The lender should sign the Certificate of Full Payment of Loan and send the same to the borrower to signify that the loan is fully paid.

What has to be done once the Certificate of Full Payment of Loan is ready?

If it will be sent via registered mail, at least two original copies should be printed. Both original copies of the letter should be signed by the sender (the lender), one original copy should be kept by the sender and the other should be sent to the recipient (the borrower) by registered mail. After sending, the registry receipt or mail receipt in relation to the mailing of the second original copy must be kept by the sender.

If it will be sent via email, the sender must send an email attaching one scanned copy of the letter that is duly signed by the sender or one digital copy that is electronically signed by the sender. An email is a recommended way of sending this letter as the letter is sent instantly and it will enable the parties to keep their records in a convenient manner.

The borrower can then use the Certificate of Full Payment of Loan to prove that the debt was fully settled.

What are the costs involved in the finalization of the Certificate of Full Payment of Loan?

Costs for sending the Certificate of Full Payment of Loan may depend on the method used by the sender in sending the letter. Email and instant messaging are the most cost-efficient ways of sending a letter as they are generally free, whereas costs for registered mail or courier will be dependent on the distance between the residence of the sender and the recipient.

Which laws are applicable to the Certificate of Full Payment of Loan?

The general law that governs contracts and obligations is the Civil Code of the Philippines.

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