As we define the word disclosure, it means revealing something or telling about a hidden fact and as we talk about disclosure statement, it serves the same purpose. Disclosure statement is a very wide phrase that is used in so many areas i.e. banking, retirement planning and loan processing and in each of these areas, it has the different purpose.
In simple words, a disclosure statement is a document that is provided to an IRA account holder about the details of the account and it’s usually sent to the owner at least 7 days prior to finalizing the account so that if the owner doesn’t like the terms and conditions, he can revoke the account. On the other hand, disclosure statements are also sent by the loan and mortgage companies to their clients and it includes the details of a loan plan i.e. interest rate, loan fee, capital amount, payment schedules and the rights of both the loan company and the customer.
Keeping Something in Mind:
Before we go any further, you need to keep one thing in your mind that no matter how much you hate to read the financial letters, you are required to read the disclosure statement letter sent to you because if you don’t, there will be serious consequences and a lot of surprises for you in the future. You should understand that a disclosure statement is not something very common and if a company sends it to you, they really want to talk to you about something important and it’s in your favor that you respond to their letter.
As we have discussed above that a disclosure statement can be defined in many ways and in each way, it has its own definition and explanation so here we are going to talk only about the financial area where disclosure statements are used. In the financial field, disclosure statements are sent to the people who are about to set up an account or want to change something with their banks or loan companies and as there are so many details, the company or bank is legally bound to inform them about these procedures and terms and conditions in simplest words so that they understand.
This is the reason that when you receive a disclosure statement, you can easily understand it even if you are not related to accounting or banking in any way. The words that are used in the disclosure statements are kept very simple and easy so that everyone can get the idea of the statement letter.
In a very simple and common example, we are going to elaborate the necessity of disclosure statements. Suppose you apply for a loan and when you meet your loan officer, he talks and talks about dozens of things that you can’t understand as you don’t know the loan procedures that well. If that’s the case, there is a possibility that you will put your foot in a wrong place. This is why the loan company sends you a disclosure statement before finalizing your loan so that you can easily understand the terms and conditions of the loan company and respond to them with your final decision.
Here is preview of a Free Sample Disclosure Statement Template created using MS Word,