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?

student loan hardship

6 Common Mistakes People Make in Financial Hardship Letters

Almost one-third of Americans are struggling financially to get by.

Even after the 2008 recession, Americans still find it difficult to afford their living expenses and basic needs. Almost half of Americans struggle to find the funds to pay an emergency $400 expense. Leaving these folks to either use a credit card, borrow money from others, or simply not pay.

If you’ve found yourself in this position, then you certainly aren’t alone. In a situation where a financial hardship arises, you may need to ask for a loan modification to lower your monthly payments. A financial hardship letter can grant you some leniency and much-needed relief.

We all know that circumstances out of our control can arise and take a toll. Knowing how to properly write a hardship letter can help you to create space to get back on your feet again. A financial hardship letter for mortgage payments, educational loans, or rent payments may be vital in maintaining your peace of mind during this difficult time.

As beneficial as it is, it’s important to know how to write a hardship letter properly. Read on to learn the mistakes to avoid when writing a financial hardship letter.

How to Write a Hardship Letter: 6 Mistakes to Avoid

1. Writing Too Much

Financial hardship letters should be concise and to the point. Stick to briefly describing the cause of the hardship, actions you’ve taken to amend the situation, and why the hardship will not improve for a period of time.

Aim to stick to around 500 words or less. Depending on the complexity and actions you’ve taken you may need to write more, but always aim to stick to the facts and leave out unnecessary comments or information.

Financial departments are sometimes overrun with financial hardship letters, so it’s best to keep it short to avoid misinterpretations. By keeping your letter short and to the point your lender gets the facts without needing to clarify information. If the information is unclear or misinterpreted then your request could be denied or delayed.

2. Referencing Irresponsible Activites

Your lender needs to know that the financial hardship arose of circumstances out of your control. If you lost your money because of a gambling, drug use, or because of trouble with the law your lender will not be sympathetic. Lenders want to see that even though you attempted to be responsible with your money, a situation or life circumstance occurred that caused financial hardship.

Causes that a lender would be understanding of include a death in the family, a job loss, an illness, or disability. Consult with your lender to see what they qualify as a financial hardship to see if your situation is applicable.

3. Leaving Out Financial Information

Most lenders require that you fill out an application for financial hardship as well as submitting a hardship letter. The application will inquire what your debts are and what you currently make. Your lender will have access to any recent purchases that require a loan such as purchasing a car by pulling your credit report.

If your financial hardship was caused because of purchasing something unnecessary or considered a luxury, then you may not qualify for financial hardship. For example, if you recently purchased a boat and the boat is for recreational use only then your lender will likely not be sympathetic.

Instead, your lender may suggest that you speak with a financial advisor who can educate you about budgeting and making purchases within your means. While this may be frustrating to hear and deal with, it may help you in the long run.

Make sure to include all recent debts to avoid being immediately denied because of leaving out financial information.

If the purchase you made was because of a basic need such as transportation or housing include these debts in your application. Explain the circumstances for needing this expense in your financial hardship letter.

Your lender still may not approve your loan modification request, but if you include all of the necessary financial information you can know that your application was thoroughly assessed. Reference your lender policies to see if your recent debt may forfeit your financial hardship loan modification request.

4. Other Sources of Help

Telling your lender that there’s an option of getting the money from another source of help could ruin your chances of getting qualified. For example, if you say you could borrow $10,000 from your parents, then your lender may consider this as an option for paying your loan instead of granting financial hardship.

Don’t mention hypothetical situations where you could get money from. Stick to the actions you’ve taken to repair the situation and why it’s not improving. Leave out any statement that could be misinterpreted or is truly not an option to rectify your financial situation.

5. Not Stating a Plan of Action

Lenders want to see how you plan on fixing your financial situation based on your current circumstances. They want to know that in the future you will again be able to pay the whole amount. Include in your hardship letter how your current situation will be worked out and how long this may take.

For example, if you recently lost your job and are temporarily unable to pay your mortgage then explain how you intend on paying the full amount as soon as you get another job. The lender wants to see how a loan modification will help you now so you won’t go into default or foreclosure later on.

6. Not Including a Proper Sign-Off

A proper sign-off for a hardship letter should express gratitude to your lender for considering a loan modification. You and your lender are working as a team, but your lender is not required to grant your request. Showing your appreciation can go a long way.

Always sign and date when you sign-off on your hardship letter. If your hardship letter applies to a residence include the address below your signature and date. This lets the lender know which residence you are referencing within your hardship letter.

Feeling More Confident About How to Write a Hardship Letter?

Continue building your confidence by exploring more information about writing hardship letters. To learn more about writing hardship letters, visit our blog.