How Can a Hardship Letter Help You?

When you get into debt, it can seem insurmountable. Bills keep coming in and if the money isn't there to pay them, it can get harder and harder to keep on top of the problem. It can be overwhelming, particularly if you have no feasible way to solve it. Financial hardship is stressful and it affects a huge number of the American population.

Debt can start relatively early in life. Student loan debt currently stands at around $1.4 trillion and consumer debt is steadily increasing every quarter. The thing is, borrowing helps keep the economy buoyant – people buying cars, homes, sending their children to school and college. Where it becomes bad, for everyone, is when those debts aren't being repaid.

What Can You Do?

So, what can you do when you don't have money to pay off your big debts and you can't see a way out of the problem, short of winning the lottery? There are things you can do to find your way out of the mess. It's all about keeping your head straight and considering the options that are available to you. One of these is writing a hardship letter.

A Hardship Letter? What's That?

A hardship letter is a document that you compose to your lender to plead for leniency with your loan. They are most commonly used when a person is defaulting on their home loan and wants to avoid foreclosure, but can be used in other cases, such as for your credit card repayments. The purpose of the letter is to more thoroughly explain your situation to your lender and hopefully to convince them to allow you more time to come to terms with your debt and propose a solution for you to resume your monthly repayments.

When Should You Consider Writing A Hardship Letter?

There are several situations where you could use a hardship letter. The following are times that you will most likely find that a lender could be sympathetic to your cause and be most likely to consider a solution from you:

  1. If you lose your job – sometimes, losing your job can come completely out of the blue and many Americans don't have the savings to tide them over until a new opportunity comes along. Most lenders comprehend that it can take time to find a new job, so may be more understanding about the time it could take to pay your debt.
  2. A death in your family – if your spouse or the main bill payer in the household dies suddenly, it can be a huge shock, not just emotionally but also financially. The person or people left behind may struggle to get their head around what needs to be paid and when. If you've fallen behind with payments or have taken a financial hit because the deceased person is no longer contributing, then your lender is likely to be more accommodating.
  3. Natural disasters – if you have been a victim of a catastrophic event of nature that causes damage to your home or affects your financial situation in any way, then it would be a very tough lender indeed who wouldn't give you a break in this situation.
  4. Medical emergencies – if you, your partner or someone else in your family has an illness or medical emergency that incurs a lot of extra financial payments then this is definitely a solid reason to compel your lender to give you a break with your payments.

Remember that for any of these situations, you will need to prove what is going on with back-up evidence and supporting documentation. Pretending that any one of these is happening will not be looked on favorably if and when it is discovered you have made it all up.

The Layout of Your Hardship Letter

Before you write your letter, sit down and think about what you want to say and how you want to say it. There is no point dashing off something short about how you can't pay your bills and you want an extension. It's also not a good idea to write pages and pages about how the situation has come to this, as that letter will be binned. Keep it short and sweet, but cover all the important points.

You should:

  • Write it in simple terms. Don't be flowery in your descriptions, be basic. They want to know what happened, not a novel on the destitution of America.
  • Be specific. Use dates and statistics. Use actual numbers. Be detailed in these specifics – i.e. you are now earning 43% less per year due to your job change, your home has been valued at $124,000 less than it was three years ago.
  • Include your name, address, phone number, date of the request, loan amount and loan reference number.
  • Paint the worst possible picture. If your child has developed a recurring ear infection and your sister-in-law has moved in while she gets back on her feet, include this. If it is pertinent to the costs of your household, it should be in the letter.
  • Be careful not to come across as angry or too emotional. Don't bargain. Don't be political or make any political references – no matter how you feel, this is not relevant to your particular scenario right now.
  • Explain the methods you have used or what you have tried to do to alleviate your financial burden, for example, downgrading to a less expensive car, selling old toys etc.
  • Tell them what you want. Here you can offer solutions, tell them how you plan to get back on your feet and how you are committed to paying off this loan.

How A Hardship Letter Can Help

If your request is successful, your hardship letter could be the first step out of the financial despair that you are in. Your lender will be open to giving you further loans if you manage this situation the way you have said you will. It will also free you up to focus on other debts and lead you on a path to a healthier financial life.

Once you have reached this point, it's important not to fall back down the hole. Make sure you have better financial planning in future and follow tips to keep you financially sound.

What to Remember When Writing a Hardship Letter

At some point in your life it’s possible that you’ll become victim to some type of financial trouble. It could be for any reason from adding an addition to your family to losing someone. When these things happen, creditors are willing to be a little lenient but you’ll need to write them a hardship letter.

There are many aspects that you’ll have to keep in mind to write an effective letter in terms of what to include and structure. To help you get the assistance that you need, here is everything that you should remember when writing your hardship letter.

The Purpose of Your Hardship Letter

Before you can start writing your letter, you have to figure out what the purpose of it is. What is your goal? Here are a few options:

  • Bring your account current
  • Suspend past due amounts
  • Lower your current minimum payments
  • Adjust your interest rate
  • Modify your loan
  • Consider a settlement option
  • Agree to a short sale of a home

If you have no idea which avenue you want to go down, you can see a financial coach to have them break it down for you. Now that you’ve got your goal in mind, you can sit down and write a draft of the actual letter. Here are a few writing tips to get you started toward writing an effective letter.

Make it Original

It’s okay to find a hardship letter template online and use it as a base for writing the actual draft but you don’t want to follow it word for word. You need to come across as sincere in your letter. If you follow a template you found, you risk sounding like a robot. It’s better to be original.

Be Honest

If you lie in your letter, the lender will find out. You need to describe your situation honestly and provide documents to back up any big claims that you make. Also, they may call you and ask you to describe your situation in better detail over the phone. Answer their questions open and honestly.

It Should Be Concise

You’ll be tempted to give your entire tragic backstory in the letter, but this is a bad idea even if it’s a huge situation. Write down the most important details only to keep things concise. Creditors are busy people. They get letters like this all day, so if you turn in a paper stack it may take a while for you to get a response. Keep it to one page.

Don’t Shirk Responsibility

Your letter is your place to explain your situation, not name names and point fingers. Blaming someone else and not taking responsibility will cause any creditor to raise their eyebrow a bit. Describe your exact situation, how you responded to to it, and how the creditor can help you get back on your feet.

Don’t Use Fancy Words

Again, you want your letter to be short, sweet, and to the point. It will be a bit hard to do this if you fill the space with big fancy words. You won’t impress the creditor with that. You need to write it so it’s simple enough that someone at a 6th-grade reading level can understand it.

Don’t Stray from Your Objectives

Don’t stray from your objectives. You are in a horrible financial situation and need the creditor to help. Don’t beat around the bush with it. You have to convince them that you can’t get out of the situation that you’re in without them.

Give an Action Plan

Do the hard part for them and go ahead and decide a solution for yourself. If you tell them what you want from them all they need to do is approve your request. Simple as that. Tell them exactly what it is you want them to do rather it be to call you to discuss options or put a loan on hold for a little while.

See a Financial Coach

Everyone needs a good editor and a financial coach can be yours for your hardship letter. They can review it for you to make sure that you made your point. They can also check it for any big grammatical or spelling errors.


So, you know what to write but how do you write it? Your letter needs to follow this specific structure:

  1. Describe the Hardship – You should use the first paragraph of the letter to introduce yourself and tell them about the situation that you’ve found yourself in. You should also use this paragraph to express your interest in getting help from the creditor.
  2. Your Response to Said Hardship – Once you’ve described your hardship you’ll move on to your response to the hardship in the next paragraph. This is where you’ll tell them what you’ve done or doing to try and resolve the problem yourself. It’s easy to make light of your situation in this section. Make sure that you don’t do that and instead use the paragraph to support your need for help.
  3. State the Goal – Your third paragraph is your goal. It’s where you’ll be telling the creditors exactly what it is you need them to do for you. Let them know your willingness to work with them to find a solution that will fit both of your needs.
  4. Enclosures – Your last paragraph is your closer. It will have the basic “thank you for your time and I hope to be able to work together to fix the problem” message. You’ll also want to close things off by providing documentation that matches up with your claims.

Everyone falls into financial hardship at some point in their lives. It’s nothing of which to be ashamed. By writing a hardship letter you’ll be able to get back on your feet if the creditor approves your request. Take your life back from your debt.

When You Should Write A Hardship Letter

For many years you have enjoyed the best job in the world. You have all your bills paid up and money stashed in the bank. There are no creditors calling your home or work. Life is pretty predictable at this point. Then one day all that changes. Your boss calls you in his office to say the company is cutting back and your job is eliminated. You beg for mercy or a different placement, but there is none to be had.

Then the struggle begins.

While you are out of work, your savings becomes spent. There is nothing left and the creditors just don’t care. They keep ringing your phone off the hook and sending those nasty settlement letters in the mail. You are at your wit’s end and don’t know what to do. You think about giving up. What’s the point in trying anymore? When you reach this moment, a hardship letter could be a smart solution.

What is a Hardship Letter?

According to the experts at Legal Zoom, a hardship letter is just what it says. It is a letter written by you, the borrower, to your creditor explaining your situation. At any point when you need assistance or an alternative payment option, most creditors will require you to write a hardship letter.

Your letter should provide the creditor with a detailed explanation of what assistance you need. The cause of your hardship and what your current situation is, in relation to finances, are also to be included. Creditors need the full picture. Don’t hold anything back. If they fully understand your situation, you are more likely to receive the assistance you are asking for.

When to Start Writing

According to the Business Insider, the average American is carrying over $5,000 in credit card debt. This number is rising each day. With a number like that, any life change could lead to a hardship letter. Below is a list of situations that may lead you to write a letter. Keep in mind this list is not exhaustive.

  1. Loss of Income – Anytime you lose your source of income, which may come from losing your job or relocating, the danger of hardships is likely to come your way. Deciding to pay your bills or buy groceries for your family are everyday questions to answer. The time between jobs can be stressful, but with a hardship letter, your creditor may take some of the stress away.
  2. Suffered an Injury – If you been injured at work, in an automobile accident, or doing repairs at home, your income may change. While you’re out of work, you may receive compensation less than your usual salary. This lessens the number of monthly payments you can make. Write that letter and explain your situation. There may be an alternative payment method available.
  3. Home Has Not Sold – Relocating means buying or renting a new home. During this time, you will need to sell your previous home. Who wants to pay two mortgages? You may need to ask your creditor to refinance or defer a few payments.
  4. Death of a Family Member- This event definitely leads to unexpected expenses going out of your pocket. When you pay over $5,000 in funeral expenses, you are bound to hit tough times. Finances may not be at the front of your mind and bills get behind.
  5. Military Service- Serving your country may send you away from home. In order to pay your creditors, special arrangements may need to be made.
  6. Divorce/Separation- Legal expenses can add up quickly making it hard to keep up the payments.

During any of these times, you may want to write that letter sooner rather than later. Don’t wait until you are significantly behind. It may actually make getting help harder to achieve.

Tips for Writing a Hardship Letter

Writing a hardship can be a daunting task. It is as if you are admitting defeat. We all hit those tough times and must ask for help. That’s okay!

Creditors are not going to put hardship letters at the top of their agendas. The bottom line is that they want their money back. In order to make sure your letter gets in the right hands; it needs to be stellar.

Let’s examine some tips for writing a hardship letter that no creditor can resist.

  • Concise is the word- There is no need to add fluff in this letter. You want to keep it simple and to the point. This will keep your audience tuned in. Don’t make them put your letter down because it was three pages long.
  • Make your request specific- Tell the creditor exactly what you are asking for whether it be a lower interest rate, refinance your mortgage or forbearance.
  • Explanation of your hardship is essential- In this portion of the letter, clearly lay what your hardship is, how you got there, and why it has affected your ability to make on-time payments. If their multiple circumstances leading to the current hardship, be sure to list them. Again, no fluff, just the facts.
  • Be sure to restate your request at the end of your letter- This is the place to remind the reader of what you’re asking for and show humility. Remember that you are asking for a measure of grace in a hard situation but ultimately the creditor has control.

Making the choice to ask for help in the form of a hardship letter is not a sign of weakness or failure. It is a sign of strength. You have the bravery to ask your creditor for help. Knowing what a hardship letter is when to write one, and tips to make it stand out will give you peace of mind and hopefully a helping hand to your finances.

Will you give in to the thought that you will never be free of debt because life threw stones at you or will you give the amazing hardship letter a chance?

hardship letter/hardship discharge

The 5 Most Common Hardship Scenarios to Use a Letter of Hardship

Few people get to go through life without worrying about money. At some point, nearly everyone has experienced some financial hardship, be it through job loss, medical bills, a natural disaster, or just bad luck.

When it happens, you have to decide who to pay first, who you can postpone, and how to feed your pets. You also want the hardship to have the least amount of impact on your credit rating. Most lenders and government bodies are willing to work with you if the worst happens, and the best strategy is to communicate clearly to them what has happened to you.

Using a letter of hardship is often the best way to communicate your situation to your bank, mortgage lender, or any other entity to whom you owe money. Although most creditors are willing to help their customers, they are picky about what constitutes a financial hardship. Let’s take a look at some scenarios in which a letter of hardship would apply:

Changes in Income or Expenditure

Have you had your pay cut or just had a baby? Maybe a roommate moved out without paying their share of the rent, or your car engine died? These unexpected changes can wreak havoc on your finances and cause real problems for you and anyone who depends on you.

If you’re like many Americans, you might not have enough savings to pull you through until your situation is corrected, so this may be a scenario in which to use a hardship letter.

Changes in Employment Status

One of the most demoralizing life events is the loss of employment. It can be a blow to your self-esteem as well as a shock to your bank account. If you’re lucky, you may receive a severance or referral to another company, but often it’s just you left wondering what’s going to happen to you.

You also may have had your work hours cut, or had your position downgraded. The result is the same: a seemingly permanent loss of desperately needed income.

Life Events

Sometimes a death in the family can cause terrible chaos if the deceased left significant debts or other financial responsibilities to their survivors. They may not have left enough money for funeral expenses.

Relationship breakdowns such as divorce or separation can lead to significant hardship for one or both parties since their living arrangements are likely to change. Moving to a single income from a combined income is most certainly a financial hardship.

Injury or Illness

These can cause unmatched upheaval in anyone’s life. Small injuries won’t significantly affect a person’s ability to make money, but more extensive injuries such as loss of limbs, car accidents, or head injuries could easily constitute a financial hardship.

The same goes for illness. Even people with the best genes in the world can get sick and incur hefty medical bills in a hurry. If you must pay for your care out of pocket, you’re going to have a bad time.

Natural Disaster or Emergency

It’s hard to say which of these occurrences is the worst, but when the world itself causes you harm, it feels disastrous and can raze your entire life. Depending on where you live, you could fall victim to earthquakes, hurricanes, tornadoes, and blizzards. Flood damage from these storms destroys homes, businesses, and roads.

Creditors are generally very understanding under these circumstances, but it is still a good idea to assume they won’t be and put together a letter of hardship.

What’s In a Hardship Letter?

Hardship letters are meant to request a particular favor from your creditor. You are asking for a deferment or new, temporary terms outside of your original agreement.

Hardship letters contain specific information about your circumstances, how they changed, how your creditor can help you, and how you are helping yourself out of your situation.

Here are some qualities of a good hardship letter to follow if you need to write one:

Be concise – Keep it to a single page. Don’t take up two paragraphs talking about the specifics of your family and pets. Use two or three sentences to explain what has happened to you, and leave room on the page for the rest of the information.

Be specific – Tell your creditor exactly how you’d like them to help you. Do you want to defer payments? Do you want to pay half for six months and lower your interest rate? If you give them a realistic baseline, they have something to work with to begin helping you.

Be detailed – Use dates and specifics. If you lost your job, tell them exactly when you started and ended. If you were discharged from the military, say the same and the reason for discharge. Bad things happen to good people; don’t be afraid to be honest with them.

Be realistic about the future – Let your creditor know if you think your situation is going to change, and if so, when it will. You can’t predict the future, but you can have an idea of how long your situation might last.

If You Need Help

If you are in a position where you need to write a hardship letter, you can get help quickly. There are different letters for different situations.

Sometimes the type of creditor will dictate what type of help they can offer you. For instance, a mortgage lender doesn’t want to foreclose, but likely can’t change your interest rate. A credit card company can change your interest rate and payments. Many companies give special treatment to military and first responders.

Take a look at our templates and see if you find a letter that suits your needs. They’re there to help you. Good luck!

hardship letter/hardship discharge

How to Write a Hardship Letter for a Military Hardship Discharge

By the end of 2018, the US Armed Forces consisted of 450,000 soldiers.

The majority of those men and women are bound to an eight-year contract. Unlike most other employers, that contract gives the army far more control over your working life – and your ability to leave.

One of the few ways you can get out of that contract early is to apply for a hardship discharge. Though the qualifying conditions are difficult to meet, proving that your family requires you more than the military can get you home to help.

Keep reading to learn how to apply and what needs to be included in your letter.

What is a Hardship Discharge?

If your family finds themselves in a situation in which you’re the only solution, a hardship discharge may be the answer. In these cases, you need to demonstrate that your family problem can only be resolved by your discharge.

Situations that qualify for a hardship discharge include having sick parents that are dependent on your assistance. It may involve a spouse or child(ren) that requires your care or a financial situation in the family that can only be rectified with your presence 

In these situations, the US armed forced allows members to apply for an early release. This type of discharge is based on genuine or undue hardship that meets the following conditions.

  • The situation is considered severe
  • The situation isn’t temporary
  • The situation has gotten worse as a result of your being in the military
  • The situation developed as a result of your being in the military
  • All other avenues for rectifying the situation have been explored and attempted prior to applying for a discharge
  • Your leaving the military is the only way in which to resolve the situation

When you apply for a hardship discharge, you may get granted separation from the army under an Honorable or General characterization. But it can also result in a transfer to the inactive reserves. In the case the hardship isn’t seen as permanent, you may be reassigned to a base closer to your home.

How to Write a Hardship Discharge Letter

To be sure, it’s not easy to get approval for a hardship discharge. The US Armed Forces have set strict standards for these types of discharges, and many service people find that they don’t qualify.

This is why your hardship discharge letter and application is so important. Take the time to carefully think through your claim and why it’s so important that you’re available for your family. You also need to ensure you meet all the basic criteria.

To increase the chances that your hardship discharge is approved, follow the guidelines below.

Basic Information

When your family is in dire need of your help, it’s easy to make the common mistakes of a hardship letter and forget the basic items you need to include on your application. These include the names, ages, and addresses of you and your family members. But you should also include the names, ages, and addresses of other immediate family members.

Keep in mind that if you’ve previously applied for emergency leave, hardship discharge, or humanitarian reassignment, you’ll have to include the dates of those requests. 

Most Important Information

After providing the most basic information required for your hardship discharge, you’ll have to start gathering the facts and reasons for your leave. The majority of your statement letter must include:

  • A description of the hardship, including the history of hardship when applicable. Includes names, dates, and places and be very specific in your description of the problem at hand.
  • A description of what you or your family has done thus far to try and rectify the situation.
  • A description of how your presence is going to improve or resolve the problem. Include what your immediate plans are.

Remember that approval of your request hinges on the decision of officials that don’t know you, your family, or the situation at hand. You should be as clear, factual, and specific as possible to increase your chance of approval. Don’t leave any detail out of the story. 

Supporting Statements

As part of your hardship letter, you’ll need to include supporting statements from your family members. You’ll need a statement from the family member(s) directly affected by your absence. But you’ll also need a statement from at least two people outside of your family.

First, have the person experiencing the hardship write a statement. In the case they’re unable to write the statement themselves, they can have someone write it on their behalf. This will serve as proof for your hardship claim. 

This statement includes much of the same information in your own letter. They should describe what the specific hardship is, why they can’t resolve it on their own, and why they can’t seek help from someone other than you.

Second, you’ll need at least two statements from people outside of your family who know and understand the situation. This might include neighbors, employers, or doctors.

Other Documents

Beyond your own statement, that of your family, and those from outside sources, you may also need to include other supporting documents. These include:

  • If part of your resolution is to seek employment to help your family, you should provide a letter from the prospective employer. The letter should be notarized and include information such as the type of employment, the salary, and your schedule.
  • If the hardship involves illness or disability, you should include a statement from any doctors involved in that person’s care. This statement should include dates, diagnosis, and prognosis.
  • If the reason for your leaving is related to a financial situation, you must provide an itemized budget.
  • In the case that death is related to your hardship, you must provide a copy of the death certificate.

The types of documents you need to provide are wholly dependent on your situation. But in most cases, the more proof you can provide, the better your chance of approval.

Ensuring You’re Successful

A military hardship discharge is a difficult discharge to qualify for. It involves a carefully considered letter and lots of supporting documentation. The armed forces are reluctant to let go of their soldiers before their contract is up, and it can be hard to convince them of your case.

But a carefully considered hardship discharge letter can make or break your case. For more resources on writing your letter and what you should include, consult our hardship letter blog for tips and advice.


student loan hardship

Student Loan Hardship: How to Use Financial Hardship to Lower Your Loan Payments

There is a growing problem in America. Student loans have gotten out of control, and more borrowers are suffering under student loan hardship.

It’s easy to see why. The student loan crisis is reaching a tipping point. People owe more in student loans than credit card debt.

There are 4.7 million borrowers in default of their student loans. You don’t need to be one of them. If you’re experiencing financial hardship, there are programs in place to be able to pay your loans without defaulting.

Keep reading to learn what you can do about your student loans when you’re experiencing financial hardship.

America’s Financial Problem

Between economic disparity and stagnant wages, it’s easy to see how we got to this point. In 2017, graduates left school with a degree and $37,000 in debt.

This amount of debt leaves recent graduates with a choice. Do they buy a home or do they pay off their student loans

They have little savings, have put off major life decisions like having children and getting married. They find that the weight of this burden is stressful.

It’s not just 20-somethings that struggle with student loans. People of all ages, even those in their sixties have reported having student loan hardship. That impacts their ability to save for retirement.

Repayment Options for Student Loan Hardship

There are options to repay your student loans if you’re experiencing financial hardship. It doesn’t need to be the end of the world. You just need to know your options.


You want to lower or temporarily stop your student loan payments when you’re dealing with financial hardship. You may be able to do that through forbearance. Your ability to apply will depend on your lender.

Those with a private student loan will have to check with their lender to see if this is a possibility. Federal student loans do offer forbearance as a temporary solution to financial hardship.  

If you see your student loan hardship as a temporary situation, you can apply for forbearance for two months. You won’t have to make payments during this time.

Forbearance is available for only 12 months out of the life of your loan. In a 20-year repayment plan, you want to use this option sparingly.

This could work for you if you’re in-between jobs and you know for sure that it’s a temporary situation. Under forbearance, you are responsible for the interest that accrues during the forbearance period, whether your loans are subsidized or not.


A deferment is similar to forbearance, but interest does not accrue on subsidized loans. With unsubsidized loans, the interest will accrue and that will be added onto the balance that is owed.

You can apply for an economic hardship deferment by contacting your lender. The deferment is good for up to three years. You’ll need to provide your lender with documentation to prove your financial hardship.

Both deferments are forbearance are short-term solutions to student loan hardship, ideally for six months or less.

Income-Based Repayment

Long-term solutions to student loan hardship can be used to lower your monthly payments. That could be enough to give you a little breathing room in your budget. These are called income-driven repayment plans or IDRs.

Income-based repayment (IBR) is one of the more popular options. Your repayment plan is 10-15% of your discretionary income. With this plan, you’ll go from a 20-year repayment plan to 25 years.

At the end of the 25 years, whatever the remaining balance left will be forgiven. Before you get too excited about that, know that the forgiven amount will be treated by the IRS as taxable income, leaving you with a huge tax bill that year.

Most federal loans are eligible for IBR. Your interest will accrue on unsubsidized loans, which can increase the balance of your loans over the repayment period.


Pay as you earn is similar to the IBR program, but there are more stringent requirements. You must have started borrowing on or after October 1, 2007, and you have borrowed through the Direct Loan program.

The main advantages are that your payments are capped at 10% of your discretionary income and interest can be limited.

PAYE may ask that come loans are consolidated before they’re approved. Under this program, your loans are forgiven after 20 years, instead of 25.

Employers Assist with Student Loans

Companies want to attract the best and brightest to work for them. They’re starting to recognize the stress that student loans have on their employees. That stress can impact how they do their jobs and impact productivity.

Employers are starting to offer student loan repayment as part of their benefits package. They’ll offer to make a monthly payment to student loans, while you make a monthly payment as well. That can save you a lot in payments.

As of right now, note that these payments are seen as taxable income by the IRS. While these payments can ease the burden of student loans, they can create another mess with the IRS.

There is a law pending in Congress that may allow these contributions to be tax-free. Contact your legislators to get your voice heard.

Help for Student Loan Hardship

Student loans have become a massive burden for Americans of all ages. With student loan debt skyrocketing to unprecedented levels, it has become more difficult for borrowers to repay their student loans.

You don’t need to default on your student loans. There are programs available if you’ve lost a job or have a student loan hardship. The best thing to do is to call your lender and work out a repayment plan that won’t be a massive burden on you.

Would you like more tips about handling debt under financial duress? Check out this article to learn the art of writing financial hardship letters.

financial hardship

A Guide to Financial Hardship: Here’s When You Should Consider Using a Hardship Letter

When it comes to their financial health, many Americans are just barely treading water. 

Only 30 percent of Americans have some kind of long-term financial plan, and 31 percent have less than $500 set aside in emergency saves. Nineteen percent don’t have any money saved to cover the cost of an emergency expense.

Do these situations ring a bell to you? Are you currently struggling to scrape together funds to make ends meet and pay the bills? If so, you might be able to use a financial hardship letter to get a fresh start.

Read on to learn more about what constitutes financial hardship and when you ought to consider using a hardship letter.

What is a Hardship Letter?

A hardship letter is a letter written to a lender explaining why you cannot make the payments you previously agreed to pay.

You might also use a hardship letter to explain why you’ve chosen a specific approach to get rid of or minimize your debt, such as a short sale on your home, a loan modification, or suspension of past due payments.

Hardship letters are typically comprised of three components:

  • How you got into your current financial situation (i.e., what has changed since you originally took out your loan)
  • What you’ve done to try and fix the situation
  • Why your previous attempts have not worked

A well-written hardship letter can help you begin to correct your situation and regain control of your debt and finances.

The key, of course, is to make sure your situation is actually considered to be a financial hardship. You’ll also need to avoid common mistakes that may cause a lender to reject your letter.

When Should You Use a Financial Hardship Letter?

There are only certain situations in which a lender will honor a hardship letter. Some of these specific situations include:

  • Losing your job
  • A sudden reduction in income (due to situations like furlough, a new job, your partner’s loss of job, a pay cut, etc.)
  • An illness or medical emergency
  • A sudden job transfer (either voluntary or involuntary)
  • A divorce or separation
  • An extreme change in your mortgage terms (often the result of an adjustable-rate loan)
  • Military service
  • A death in the family
  • The incarceration of a family member
  • A sudden increase in expenses or debts

An unexpected catastrophe can also bring on financial hardship, especially if it necessitates significant maintenance or major repairs.

How to Write a Financial Hardship Letter

Do any of the above situations apply to you? If so, you might want to consider writing a hardship letter to your lender explaining the situation. 

Not sure how to write a hardship letter? These guidelines can help:

Make Your Request as Specific as Possible

For your letter to be taken seriously, you need to be very specific about your objectives. What do you want the lender to do?

Do you want them to suspend your past due amounts? Do you want your interest rate or monthly minimum payments adjusted? The more specific you are, the better.

Explain Your Hardship

Next, you need to explain why your situation ought to be considered a hardship. Keep this section concise.

Simply sum up what has happened in your life over the last few months and why those events have made it hard for you to keep up with your loan payments.

Explain the Steps You’ve Taken to Correct it

It’s also important to explain what you have done so far to correct your situation. Have you cut your expenses or taken on a second job?

Explaining what you’ve done will help your lender see that you have taken action but still need additional help. 

Restate Your Request Clearly

End your letter by restating as clearly as possible what you would like your lender to do.

Be as explicit as you can and make it clear that, once you receive what you’re asking for, you will be able to keep up with your payments without any additional issues.

Include Supporting Documentation

It’s also helpful to include documentation that backs up the points you’ve made regarding your financial situation. For example, you might want to include copies of your medical bills or a copy of your divorce order.

If you include these documents, address them in your letter as well. Just a sentence or two explaining what they are is sufficient.

Keep it Short

Remember, your letter should be short and to the point.

Your lender is busy, and they receive tons of letters and emails every day. They don’t have time to read a novel about your current financial situation. Limit it to one page or shorter, if you can.

Be Humble

A little humility goes a long way when you’re writing a hardship letter. Avoid placing blame on your lender or any of the other parties involved in your situation. Keep your tone as neutral and objective as possible.

Be sure to thank your lender for their time, too. Remember, you need their help. If the person reading your letter thinks that you’re being hostile, aggressive, or ungrateful, they may reject your request. 

Have Someone Review Your Letter

Finally, it can be helpful to have someone review your letter before you mail it.

If you’re working with a financial coach or a nonprofit housing counselor, he or she can review your letter and help you with any changes to the tone or wording that they think might increase your chances of having your letter accepted. 

Do You Need to Write a Financial Hardship Letter?

Do you think a financial hardship letter can help you with your current financial situation? If so, be sure you follow these guidelines when writing it. 

Do you need more guidance on how to write your hardship letter? Are you looking for examples or specific information on what to include and avoid? If so, we can help.

Check out the hardship letter archives on our site for all kinds of useful articles. This one, which is all about writing an effective hardship letter, is a great starting point.