What dual purpose does the payment letter serve for the borrower?

The payment letter is an essential document that serves two key functions for the borrower. Firstly, it informs the borrower about the specific terms of the loan, which includes the principal amount, the interest rate, and any other relevant details that outline the borrower's financial obligations. This information is crucial as it helps the borrower understand the structure of their loan and what to expect in terms of repayment.

Secondly, the payment letter provides clear instructions on how to make the required payments. This can include specifics on payment methods, due dates, and where to send payments. Having this information consolidated serves to guide the borrower in maintaining compliance with their loan agreement, reducing the risk of missed payments or misunderstandings regarding the loan.

The other options do not encapsulate both aspects of instruction and loan terms as effectively as the correct choice, as they either introduce irrelevant elements, such as tax documents or credit score updates, or focus solely on communicating rates and payments without addressing the need for comprehensive payment instructions.