Letters to creditors: 5 Adaptable sample letters for convenient and effortless writing

You can come across challenges that make it difficult for you to keep up with your financial commitments. An injury, the loss of a significant source of income, or having to make an emergency payment can all disrupt your carefully planned budget. Consider writing letters to creditors at your earliest convenience if you're having trouble paying off your financial obligations.

Letters describing your financial hardship can be a significant component of any debt relief plan. A letter can be the push you need to persuade the lenders to work with you if you have bills to pay or if you need a payment plan to get caught up.

What are financial hardship and the role of hardship letters

Financial hardship can be primarily characterized as your inability or difficulty in paying off your debts.

The best strategy to justify your account's delay is to write letters outlining your financial problems. They may be used by lenders to decide whether or not to provide relief by reducing, delaying, or suspending payments.

Common causes of financial hardship

There are many circumstances that can be considered hardships. Some causes can be simply monetary, whereas others might be based on significant life experiences. The following are some of the most usual types of hardship.

• Disease or injury
• Changes in work status, i.e., Income loss
• Natural catastrophes
• Divorce or Death
• Military deployment

You can use sample letters to explain your financial situation to your creditors and propose a solution that would serve both your interests and that of your creditors. Be sure to provide details specific to your circumstance.

Whatever your motivation, it's critical to communicate honestly and openly with your lenders. With a reasonable request and a promise to pay back what you owe, you can demonstrate that you are prepared to work with your creditors to find a solution.

Take stock of your situation before writing a hardship letter

Keep in mind that in some provinces, contacting a creditor after a long period of no payments may be considered "acknowledging the debt," and doing so can reset the statute of limitations in the same way that making a payment does.

Always call it an alleged debt while interacting with creditors or debt collectors. On occasion, they might make an effort to convince you to admit the debt orally. The statute of limitations might potentially be restarted by this.

How much time has passed?

Depending on the province, the statute of limitations that determines how long a creditor has for debt collection on a debt that a debtor no longer acknowledges might range from 2 to 6 years.

Credit reporting organizations list debts on your credit report depending on the date of each debt's most recent activity. After six years of inactivity, a debt is often no longer included in an individual's credit report.

Alternatives to writing letters to creditors

To acquire the assistance you require, you might not even need to write a hardship letter.

How these mechanisms work

On their websites, some financial institutions include all the details needed to submit a hardship relief request.

A home loan support page from some banks may lead you through your options, outline the paperwork you might need, and offer contact numbers you can use to get assistance. Through their website, you might be able to fill out an official application for mortgage aid and upload any necessary paperwork.

Many prominent credit entities may even have web pages where their credit card holders can find out how to ask for temporary lower monthly payments and interest rates in order to receive financial relief. By going into your account online, you might be able to see the available plans and enroll.

Writing letters to creditors can help even if there are alternatives

While connected to your account, other creditors may also provide means for you to submit an online request for help with a financial crisis. However, drafting a hardship letter before speaking with someone over the phone or in an online chat could indeed help you get your thoughts together.

The purpose behind letters to creditors

The purpose of the letter must be decided before you start drafting. What particularly are you going to ask for? You can make a number of requests to your creditor, a collections company, or a mortgage lender.

Types of letters to creditors

Based on the nature of your predicament and your request, they can be classified into the following types:

• Goodwill letter
• Request a reduced payment plan from a creditor
• Request to revoke wage assignment
• Requesting removal of inquiries
• Request an alternative payment plan from a creditor

How to write letters to creditors

Obtain the loss mitigation department's contact details from your lender. You want to address your letter to someone who has the authority to assist you. To help the lender locate your account and answer your question, remember to include your loan number, name, address, and phone number.

What to include in your hardship letter

Providing pertinent details is crucial. What led to your predicament? What steps have you taken to fix it? What exactly can your lender do for you? Remember to state when your difficulties started as well as how long you think the issue will last.

What you should avoid mentioning in your letter

Don't make any references to possible outside financial resources you could have access to, such as borrowing funds from family members. Your prospects of receiving assistance from your creditor may be harmed by this information. In addition, your family member might prefer not to intervene in your financial difficulties. Above all, keep it brief. At most, you should use one page for your letter.

Honesty is indeed the best policy

The best method to convince the lender that your claims of hardship are valid is to provide supporting documentation regarding your current income and other financial assets. The following are some examples of papers you might want to submit:

1. Statements of your bank and brokerage accounts that do not include money in your retirement or college savings accounts
2. Independent contractor and employee income as they appear on form 1099s or W-2s.
3. Signed copies of the tax returns for the current and prior years
4. Letter terminating employment
5. Medical expenses
6. Police reports and accident reports
7. Repair costs for losses that insurance doesn't cover
8. Military orders
9. Orders for child support or alimony (spousal support)
10. Certificate of death
11. Proof of imprisonment
12. A detailed list of monthly costs and a monthly budget
13. Public assistance income proof
14. Award letter for disability
15. Proof of government support
16. Affidavits that are notarized
17. Notice of a property tax hike
18. Credit report

Be descriptive: the documents should corroborate your statements

Be prepared to be rejected if you make any statements in the letter that seem false or are blatantly untrue. Any statements you make in the letter should be supported by relevant, precise documentation. Additionally, be ready to go into more detail about your circumstance over the phone or in person.

Keep it simple

Hardship letters should describe the situation rather than blame anyone.

No matter how harsh your circumstance may be, the creditor will be suspicious if you attempt to place the blame elsewhere or identify a scapegoat in your hardship letter. Instead, concentrate on detailing the precise circumstance, your solution, and why you require the assistance of your creditor to succeed.

Using plain language is a fantastic method to make your communication succinct and to the point. Don't go overboard attempting to wow the reader; instead, try to write your letter at a sixth-grade reading level. Remember to read your letter out loud a second time to ensure that it flows well.

Remember your financial goals

Keep in mind that you're writing a hardship letter with a specific goal. Even though you're struggling, discard your emotions and simply state the facts.

Your letter should suggest your perfect solution or an acceptable variation of your ideal solution, in your opinion. Give them a starting point or something they are likely to find reasonable or acceptable. Obviously, you can only pay as much as you can afford to; however, you should pay attention to your creditor's interest as well. Help the lender by making it simple for them to comprehend what you need, how much you can afford, and how they can assist you.

The creditor will be more willing to assist you if you are clear about what you need from them. All they have to do is agree because you've already put in the effort to find a solution. Whatever step you urge them to take, you must make it plain to them that you need to take it.

Sample letters are an excellent resource

Instead of going it alone, it is best to reference sample letters to creditors to have a clear idea about the format of such a letter. You will have to include any peculiarities in your situation while using letter templates of this sort.

Provide as much detail as required, keeping in mind the above considerations. Sample letters are an excellent resource that streamlines the whole process and provides a structure that avoids any inadvertent errors you might make. Even seasoned writers make mistakes, and thus having sample letters at hand indeed saves you a lot of trouble.

Closing thoughts

If you're having money problems, you've definitely felt a variety of feelings, including grief, worry, panic, despair, and even shame. When you're dealing with a lot of stress, it is easy to lose sight of your physical and mental health. Taking proper care of yourself, especially during such trying times, is imperative.

Although you may feel alone, please know that going through financial difficulties is something that many people have to cope with and that creditors are skilled at handling these situations.

One of the simplest ways to request assistance may be to contact your creditors. A template letter can be of great help in this regard.

Asking a friend or member of your family for a loan is likely to put a burden on your personal relationship. Instead, you're only forming a commercial agreement with someone who won't suffer any repercussions if you temporarily stop or scale back your payments. You can have that discussion with your creditors and obtain financial assistance by using a hardship letter.