What must a note holder do after receiving the final payment on a loan?

When a note holder receives the final payment on a loan, it is essential for them to formalize the completion of the loan agreement. By signing the note and marking it as "Paid in Full," the note holder provides a clear and official acknowledgment that the borrower has fulfilled their financial obligation. This step is crucial as it releases the borrower from any further obligation under that specific loan agreement, ensuring that there is documentation to confirm the loan has been fully paid.

Returning the signed note to the borrower serves as proof of payment, which is important for the borrower to keep for their records. This process protects both parties and helps prevent any future disputes regarding the status of the loan. The act of marking the note in such a way also represents the closure of the transaction, which is key in lending practices.