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.