If you are experiencing some form of financial restrain to meet your medical bills, school fees, or the living conditions in a different region, consider writing a hardship letter. This letter gives a detailed explanation as to why you need special consideration due to your prevailing financial constraints. This should include your situation with the lenders, your inability to handle the circumstance, and your plans to get out of this situation.
However, you must first carefully assess the situation before deciding whether to write the hardship letter because some employers, lenders, learning institutions, or hospitals aren’t as lenient. Therefore, you need to give examples as to what is causing your financial difficulties and some of the reasons to state include;
- The family breadwinner passing away
- Involuntary or voluntary job transfer
- Unemployment
- Medical emergency
- Incarceration
- Reduced income due to a pay cut, furlough or spouse losing work
What Is a Hardship Letter?
A hardship letter is prepared by the consumer and sent to their creditors, explaining their circumstances regarding why they are unable to meet their commitments. Evidence supporting the situation should also be provided. With a hardship letter in hand, lenders may be willing to work with you to develop a more manageable debt repayment plan.
It is far better to communicate with your lender and discuss potential solutions than to let it go until a collection agency comes calling. Never ignore overdue payment notices. Take action immediately and work with your lender to develop a solution that works for both parties.
What Is a Hardship Letter Template?
Hardship letter templates can save you time and ensure that you include all of the appropriate details. In addition, many people have multiple debt payments each month, which contributes to their challenge in meeting monthly payments. Creating a template or downloading a hardship letter template also ensures you are consistent about the information you provide to your creditors.
A hardship letter template should include the following details:
- Your full name and address
- Name of the lending institution
- Account number
- Explanation of your situation
- An explanation of the steps you have taken to resolve your cash flow/debt issues
- What you would like the lender to do to help resolve your issues
- Include any necessary documents
- Thank the lender for their assistance
- Sign and date the letter
- Provide full contact details
When a Financial Hardship Letter Is Required
A hardship letter explains to a lender why you are unable to meet your debt payment obligations. Failure to meet your payments can contribute to poor credit ratings and collection if the debts go unpaid. However, there are situations when a hardship letter may help manage your payment plan with your lender. These situations include:
- Reduction in pay due to a layoff or reduced hours
- A new disability or an existing one that has become worse
- Serious injuries
- Serious illnesses
- Legal separation or divorce
- Death
- Incarceration
- Deployment to a military assignment
- Change in station orders
- Man-made or natural disasters
- Job transfer to another location
How to Write a Hardship Letter
When experiencing any of these situations, it is best to write a hardship letter to get some leniency.
Step 1. Start the first paragraph by writing why you are requesting special consideration and your will to promptly come up with a solution. For instance, if you are experiencing challenges meeting your medical bills, you should state the amount due and how long this might happen. While doing this, state you are open to negotiation on how a suitable settlement will be reached to settle all your debts.
Step 2. In this section, do a detailed explanation of the events that led to your financial constraints. While doing this, chances are you might get too emotional, but it is best if you kept this at a minimum. It would be best if you instead prioritized being specific and frank about the events that led to your financial difficulties in the first place.
For example, in your hardship letter for migration, explain how the shift of location will adversely impact your income. That is the high cost of living in the new town, and the cost of relocation, especially if you have kids as this would mean a change of schools. Consequently, you should explain how this will result in a substantial fall in your income.
Step 3. This step entails giving a comprehensive explanation of how you plan to reverse your present financial difficulties. Nonetheless, never make a promise that you can’t meet as this would only make you seem more unreliable. For instance, you can explain how far a fee waiver would help boost the challenges currently being experienced. You need to be proactive while doing this to increase the chances of your lender, even considering your request.
Step 4. Here, you should give a detailed proposal on how you intend to meet your pending financial obligations. While calculating the amount payable, you should also state an interest amount to pay as a show of good faith. For instance, you can decide to pay your pending medical bills within four months with an additional three percent interest. You should also state the precise date by which the repayment will be complete to boost your credibility.
Step 5. The last part of your hardship letter should be ab apology and stating your willingness to discuss the alternate terms of repayment. Moreover, express your desire to come to a mutually favorable resolution. As you do this, state your phone number and the times when you can be contacted in case of anything. Finally, thank your addressee for their time and consideration and close your letter.
#1 – Sample Hardship Letter
The following sample can be used to assist readers in preparing their own hardship letter:
[Your Name]
[Your address]
[Date letter is sent]
[Your lending institution and address]
[Loan/Account number]
Dear [Name of loss mitigation manager]
[Explain your financial hardship situation that has led to your current cash flow problems and delinquency]
[Explain the steps you have taken to resolve the issue and why you are unable to resolve the financial issue]
[Include what you would like the lender to do to assist in resolving the situation]
[reference any enclosures that you are including with the letter. e.g., layoff notice, divorce or separation agreement]
Thank you for taking the time to consider this request and working with me to resolve my current financial debt situation with your firm. Please contact me at your earliest convenience so that I can begin to settle my outstanding loan.
[Your name]
[Your contact information]
[List of attachments]
#2 – Sample Hardship Letter
To Whom It May Concern:
I am writing to you to request for a {fee waiver/medical expenses/tuition reduction/ reconsideration of my immigration}. For the last {amount of time}, I’ve been under severe {financial/medical/emotional} hardship that has led to me finding it hard to meet my responsibilities fully.
I’ve had to deal with {health issues/ divorce/injury/unemployment/child support} {from date}, which has drained me emotionally and financially. I’m struggling to meet my set obligations due to losing {key support}, which has impacted my overall productivity significantly. Furthermore, despite my continued persistence and hard work to handle this situation, I’m still having a hard time making sure everything goes back to normal.
Because of this, I have decided to ask for your help, and I’ve attached written statements from my {bank/therapist/ doctor/lender} to confirm the severity of my condition. I have also outlined a plan on how I can be as proactive as possible to help me get myself back on track financially.
Thank you for your consideration.
Sincerely,
{Sender Name}
Sample Hardship Letter Examples and Templates
Hardship Letter for Immigration
- MS Word
Financial Hardship Letter for School
- MS Word
Financial Hardship Letter for Medical Bills
- MS Word
Financial Hardship Letter for Fee Waiver
- MS Word
Questions that a Financial Hardship Letter Should Answer
The best guidance is to stick with the facts, be honest, and stay focused on the financial problem. Digressing into emotional issues, detailed health issues, and problems at work only confuse the issue and does not help your case.
There are three basic areas that everyone should address in their hardship letter. These include:
- What is your current financial situation, and what has made the situation so difficult that you cannot meet your monthly debt payments? When did this hardship begin, and is it permeant or temporary?
- What have you done to manage the situation and address the specific issues causing the problem?
- What do you want the lender to do to help you, and how will this action also help the lender?
Be succinct and to the point. The lender may accept your suggestion or counter it with a suggestion of their own. You may be able to enter into some negotiation with the lender depending on the facts and details of the situation. Be prepared to discuss alternate solutions proposed by the lender.
Tips for Writing a Hardship Letter
The following are tips that everyone should consider when preparing a hardship letter they are planning to send to one or more lenders.
- Avoid plagiarism – use a template to help you prepare the letter, but use your specific facts and describe your situation in your own words. You do not want the lender to think you just copied an online letter and have not put much effort into the letter.
- Your credibility is everything – failing to be honest about some of the facts only leads to mistrust and causes the lender to question every detail, which could lead to a solution that is not to your benefit.
- Stick to one page – be concise and stick to the facts that support your proposal. Lending managers do not have loads of time to spend, and they will only deal with the financial facts while making a decision on your situation.
- Be accountable – while it is tempting to blame others for your troubles, the reality is that this is your problem to resolve, and you must take on the responsibility to resolve the issue. Blaming others may indicate a red flag to lenders indicating that you do not assume responsibility for your actions.
- Stay focused on your objective – you are in a difficult situation. Help is needed, and you need to convince the lender it is in their best interests to help you succeed.
- Avoid jargon or fancy words – keep it simple and to the point.
- Provide a solution and an action plan – be reasonable in your request and ensure that both parties benefit from the solution you propose. Be specific with your action plan, so the lender knows exactly what you want them to do. Taking this action will enable you to recover financially and ensure that the lender receives what is owed to them.
- Use a financial couch – to assist in identifying a solution that will be acceptable to the lender with all of the pertinent facts and no errors. They can also help proofread the letter.
FAQs
The following include answers to common frequently asked questions:
What are some common examples of hardship?
There are many different situations that can cause consumers to fall into a financial hardship situation. Many are outside of their control and, unfortunately, part of major life events. While many others are caused by bad decisions, which consumers must be accountable for and take action to resolve the situation. Financial hardship situations include events that reduce your income or increase expenses significantly and include:
- Reduction in pay due to a layoff or reduced hours
- A new disability or an existing one that has become worse
- Serious injuries
- Serious illnesses
- Legal separation or divorce
- Death
- Incarceration
- Deployment to a military assignment
- Change in station orders
- Man-made or natural disasters
- Job transfer to another location
Temporary situations do not count as financial hardships. For example, your property loses value, spending too much on nonessential items or activities, loan interest rate increases, or loans that can be repaid with liquid assets that you may have and can be liquidated to repay your debt.
What is considered extreme financial hardship?
Serious or extreme financial hardship occurs when the individual or family member experiences a sudden and unexpected illness or accident or other extraordinary and unforeseeable circumstances caused by events beyond the control of the consumer. Each state defines in law what an extreme financial hardship may be, and consumers should consult with a financial consultant if they feel they are experiencing extreme financial hardship, which they may qualify for.
Key Points
Consumers who are unable to meet their monthly obligations to repay debt and monthly costs risk losing everything if they do not take action to deal with lenders and attempt to renegotiate the terms of their debt payments. Failure to take action can result in bankruptcy, reclamation of vehicles, and collection agencies hounding them for payment.
One approach is to contact each lender and propose a solution that reduces the monthly payments or places a hold on the payments until such time the financial hardship has been resolved. Contacting the lender in advance is always the best approach. It demonstrates your intent to repay the loan; however, you need to negotiate better terms while ensuring that the loan will be repaid.
Consumers can prepare a financial hardship letter that outlines the situation and why you are currently unable to meet your obligations, the action you have taken to resolve the issue, and your proposed solution. The lender may accept the proposal or counter the proposal as part of the negotiation. The result should be a win-win for each party.
Be concise, honest, and factual in your letter. Once you have lost integrity, it is very difficult to earn it back and much more difficult to negotiate with the lender. Financial hardships can occur anytime to almost everyone due to health issues, layoffs, and poor decisions. There are solutions that many lenders will accept to help you recover and pay off your debts.
