What Is a Hardship Letter?

A hardship letter is a letter explaining your situation involving financial difficulty. It usually involves failing to pay a loan on its due, but it also applies to other economic binds such as a mortgage, foreclosure, and short sale. It aims to bring light to your situation, and hopefully, they’ll grant you consideration or leniency to settle your responsibilities at a later deadline or through other means. If you owe your landlord a two months worth of rent, it’s only right that he knows about your situation. This will serve as your explanation letter must that will state what you’re going through and how it’s preventing you from fulfilling your responsibilities. Because at the end of the day, its business and if you’re contributing to the loss of their profits without them knowing why, they won’t hesitate to cut you off.

A hardship letter is among the requirements needed by lenders for you to become eligible for more considerate options when you fail to do your payment obligations. This is a normal occurrence. Most Americans are credit card holders, and as of 2018, more than half of them are indebted, amounting to a collective $26 billion credit card debt.

A hardship letter varies according to different purposes. Below are some general inclusions that you often need when making one:

1. General Information: name, address, contact details, and applicable number (e.g., loan number)

2. Important details about your loan and property, including your months of delinquency, amount of unpaid balance, and others.

3. Reasons why you failed to fulfill your responsibility.

4. Background of your financial situation and the steps you’ve taken to overcome it.

5. Statement of your request or purpose on why you’re writing the letter, may it be for an extension, loan modification, and other forms of the proposal.


What Are Viable “Hardships”?

According to Inc, there are at least 12 hardships that an average person will eventually go through in life. These include something seemingly as harmless (but definitely embarrassing and distressing) as spilling on your shirt a few minutes before your presentation, a heartbreaking betrayal of someone you trust, a failed investment, and something largely significant such as a life-altering moment. They’re intimidating and anxiety-inducing, but here’s the good news: your chance of survival is relatively high.

A financial hardship might be among the most challenging dilemmas you’ll ever face. You can look back with a laugh over a coffee-spilled shirt, move on from a shattered trust and learn a lesson or two from a momentous situation, but a financial struggle has a lot at stake. In worst-case scenarios, it can cost you your business or your property and threaten your life’s stability. These types of losses are not something you bounce back from after a few weeks.

When writing hardship letters, there are only a couple of reasons that your lender, bank, or mortgage servicer deems as acceptable. Your reason should clearly correlate to your inability to pay. Here are some top “hardships” that they take into consideration:

1. Termination

2. Wage reduction

3. Divorce or separation

4. Death

5. Illness or medical crisis

6. Failing business

7. Debt pile-up

8. Having a newborn

9. Payment shock

10. Military deployment

Overcoming Financial Hardships

You can never dictate your life’s flow. One day, your rowing in the right direction, and then the next day, the waves are already against you, like you’ve done something to aggravate the situation. 

Your financial struggles are often like that. You might feel secure with your stature now, but you might only be a second away from suddenly receiving a termination letter, or unknowingly, your debt might have piled higher than you expected. Financial hardships are surely an uphill battle, but instead of sulking in the corner complaining how miserable your life has become, you need to face them head-on to overcome them.

Here are some ways on how you can conquer your financial hardships:

Assess Your Situation The first step into overcoming your challenges is to assess your situation. What financial binds are you facing? How is it affecting you? These are some questions that you need to ask yourself in order for you to redirect your focus to the things that matter towards the solution. To do this, list your concerns and rate their urgency. It could be school fees, weekly groceries, or utility bills. Once you’re done, assign a goal for each problem so you can start your plan by knowing how you want them to end up.List Realistic Solutions Derive an action plan from each goal by listing practical solutions. List down some pointers on how you can ease your situation within a timeline and work your way towards the ultimate resolution. If you’re behind on your credit payment, you may want to skip all the shopping and stick to your necessities for a while until you’re stable again.Set a Budget Budgeting might be the oldest and the most basic financial trick on the books. It pays when you set a limit to your spending and to allocate your expenditures fairly. Now that you’re caught in a dreadful situation, you might want to start monitoring your finances. Categorize your needs and determine the amount you’re willing to put under each label. It sets the limit and helps you keep track of your cash flow.Track Your Progress This is the most rewarding part of any plan: progress tracking. After you’ve diligently followed your budget and your action plan, monitor your development through a tracking chart. See if there’s an improvement in your finances and if it has helped alleviate your burden. If it’s not, you can devise another strategy or find ways to improve your original plan.

How to Make a Hardship Letter

Finanial boulders are all over the way, in any stage of your life. It doesn’t matter how many times it tried to knock. What matters is what you’re going to do get on the smooth road again. A hardship letter is a big part of that solution. Below are some best practices in making your own:

Step 1: Employ Original Narrative

Writing a letter, especially for this purpose, might be among the things you wish you never have to do. Because of this, instead of delving into your situation, you might be tempted to apply general explanations and cliche statements with a predictable narrative flow. Here’s a suggestion: don’t. Your letter document has to be original and one that actually explains your situation in a direct but sincere manner. You won’t get away with copy-pasting general ideas, especially if you’re asking for credit leniency. Your company has already received tons of these letters, and when they see that yours was not a product of effort, that communicates a signal of pretense, and your request might not be granted.

Step 2: Avoid Scapegoating

It’s frustrating to be caught in between a troublesome financial situation, and your letters might show an overflow of your emotions. But, you should never include blame on your copy, especially not towards your credit company, lender, or landlord. Pointing fingers seldom ends well. Your hardship letter should communicate the need for consideration because of your circumstances. Adding blame on your narrative would shift the focus of your purpose to you wanting to have a scapegoat.

There may be lines of emotional outbursts on your explanation, but tone it down. Instead, be factual. State the actual events leading to your situation and be straightforward about it. As an example, if your business is running low as seen on your sales report, which is why you’re having a hard time paying back your loan, cite graphical results of how your profits have significantly decreased for the last few months. This explanation adds more weight to your situation instead of a heartbreaking and tearjerking paragraph.

Step 3: Make Your Request Direct and Clear

Know what you want to get out of the letter. It might be a due extension or a decreased interest. Your letter should be able to tell this directly and clearly if it’s going to help your situation. Avoid beating around the bush and spill what your objective is all about. If you can’t afford to pay your loan for the month, you can say, “Due to my circumstance, I need a two-month postponement of my loan payment.” Be concise and relay your offer, no more, no less.

Step 4: Provide a Solution

Show your creditor that you’re willing to overcome your situation by providing a solution. They’re more likely to get you off the hook when they see that you have an action plan in mind. If your business is facing significant loss, you can state what efforts you’ve done to compensate for the negatives. As an example, you can say that you’ve been cutting short on the supplies and the number of productions. The solution you’re brewing tells them that you intend to get out of the situation and get back on your feet as soon as possible, which also raises your request’s chances of being approved.

Step 5: Apply the Best Policy

You might think you’ll get out of lying every time, but it’s not going to help your situation. In hardship letters, it’s important to be honest in every part—your situation, your explanation, and your solution proposal. If you decide to include any wrongful information just to spice up your situation, there’s a big chance that whoever will review your letter can see right through your deceit and reject your proposal immediately, without second doubts.


How many times are you allowed to apply for financial hardship?

It depends on your bank, lender, or anyone in charge of your credit, but it’s usually more than once. They’ll have to review your application and assess whether or not your situation has improved since the last time.

What is a credit rating?

A credit rating is an assessment of a person or an organization’s ability to fulfill their credit responsibilities and other financial obligations. It’s a huge factor on whether or not an individual, a company, or even a state will be approved of a requested loan or not.

What is a payment shock?

Payment shock is the sudden substantial increase in a loan or a rent’s periodic payment that may induce the risk of loan default.

Financial hardships may be a cause of a string of irresponsible decisions or a sudden shift in your life. Anyhow, it’s certainly not welcome. Every individual in every household faces significant financial challenges. Even when you have a stable job or your family’s full support, economic issues such as inflation and other things largely contribute to how you manage your monetary resources. It never gets easy because that’s how you succeed. No matter how hard it gets, the solution is just around the corner. According to Sophocles’ ancient knowledge, “There is no success without hardship.”