40+ Hardship Letters

What is a Hardship Letter and When Can You Use It?

A hardship letter is a letter explaining your current financial situation–why you can’t commit to the payment schedule that you have initially agreed upon with the financial institution. It’s different from a promissory note in the sense that you are requesting for a loan modification or adjustments in your current payment plan. Many factors constitute a hardship, although the bank or lender can only accept a few reasons. Since it talks of your financial situation, you can use it for areas that require debt payment. Here are a few instances where you can use a hardship letter to negotiate your current payment plan:

For mortgage. Mortgage payments can consume almost half of your monthly paycheck. According to Statista, from the year 2015 to 2019, there has been a steady increase in home mortgage debt of households and non-profit organizations. Suffice it to say, owning a house is a big financial responsibility. You have to have careful consideration before buying a house. However, if you already find it hard to keep up with your mortgage payments, you can always write your bank a hardship letter. That way, your bank can also check if they can do a loan modification for you.For credit card payments. These days, we rely on technology when it comes to our spending. From gym membership contracts to retail purchases, that piece of plastic has become an important part of our lives. However, irresponsible use can be detrimental. Before you know it, you are already up to your neck in debt. If it becomes too difficult to pay your bills, you can try to negotiate with the bank through a hardship letter.For your auto loan. Cars are a staple to today’s society. It’s almost impossible to get anywhere without driving there. When you walk by a car shop, chances are you’ll find cars that are sold with an incredibly low downpayment. That’s fine, except that would mean the monthly payments are incredibly high, it would be easy to get yourself trapped in a world of debt. These days when credit rating is important, you need to find a way to keep up with the payments. However, if it becomes hard for you to do so and selling the car is not an option, that’s when a hardship letter becomes useful.For personal loans. There are times when we find ourselves in a bit of a bind. Whether it’s for rent, grocery, or electricity, there may be times when we need quick cash to cover the expenses. That’s when personal loans come in. Just a quick look at the loan agreement, and you’d easily get your hands on some dough. They help us in these desperate moments. But even the quick remedy might soon become the poison. When that happens, try to renegotiate your terms by writing them a hardship letter.For immigration. It’s not all the time that a hardship letter is only for debt payments. There are circumstances wherein a foreign citizen needs to immigrate to the United States. However, the US government banned him from doing so. When that happens, you can try to get that waived through a hardship letter. However, they will only consider “extreme hardship” as grounds for the waiver. Extreme hardship is when a US citizen is in deep financial crisis, and only that foreign citizen can help him but couldn’t send the money to him in whatever means possible.

Whenever it comes to financial hardship, whatever debt you are in, you can always try to negotiate with your bank. They, too, will find a way to help you make your payments as much as possible.

What Qualifies as a Hardship?

“Hardship” is a broad terminology. It can describe just about any aspect of life. Every day we experience difficulties as we go about our daily routine, whether it’s trying to fight your way through the subway train or trying to beat a deadline at work. However, there are only a few instances or examples that your financial institution may consider as “hardship.” Here are a few examples of what can qualify as a hardship:

Medical hardship. Medical bills are expensive. They can exhaust all of your financial resources when you have already used up your insurance coverage. What’s worse is that you may be forced to take unpaid leaves once you have already consumed your sick leaves, putting you in an even worse situation. In this case, your bank may consider your situation as an extreme hardship and help you with your payment settlement.Calamity/Natural disaster. The weather is unpredictable. The skies shine brightly in one minute and spew thunder and lightning in the next. It’s not something you can prepare for, and the damage that comes after can be extensive. Building yourself up right after a disaster takes a toll on your financial resources, and that’s why such events are considered “extreme hardship.” Unemployment. They say that before submitting that official resignation letter, you have to make sure that you have enough money to cover at least three to six months’ worth of expenses. But what if you receive a termination letter before you have finished your preparations? If you suddenly find yourself jobless, it will be hard for you to make ends meet.Unpaid college loans. If you are well over 59 years old and still haven’t paid off your student loan, this can be considered a hardship. According to Investopedia, you can still try to make a hardship withdrawal from your 401k account even if you are below 59 years old, but the IRS will charge you a 10% penalty tax.

Although a hardship letter is useful for situations where you find it hard to make a payment due to your financial crisis, it’s not something you can qualify for all the time for any given situation. That’s why financial institutions need to take a look at your situation first before making a decision.

Are There Other Options Available For Me?

Renegotiating the terms of your payment through a hardship letter is an excellent way to make ends meet. But, did you know that there are other ways for you to pay your debt other than writing your bank? If you have a retirement account or a 401(k) account, you can try to make a “hardship withdrawal” to cover some of your expenses. If you are already over 59 and a half years old, you can already make a hardship withdrawal at any time. However, for people below 59 and a half years old, you have to be in extreme hardship first before they approve your request for a hardship withdrawal. And once approved, you will be subject to a 10% penalty tax for early withdrawal. Investopedia lists a few criteria set by the IRS for you to be eligible for a hardship withdrawal such as burial or medical expenses. Once qualified, your employer or financial advisor would require certain documents from you for submission. Refer to this link for further information regarding eligibility on hardship withdrawal.

How To Write a Good Hardship Letter

Mastering the art of persuasion takes a lot of practice. You have to know the workings of the human brain to make a convincing argument. And with creditors and banks having dealt with too many people to last them a lifetime, it would be hard to turn their decision around. Fortunately, we can change their minds by explaining our situation using a hardship letter. You can download our available templates and sample to save you from the hassle of writing a letter. You can also opt for doing it yourself using our step-by-step guide on how to write a hardship letter. So how do you write a convincing hardship letter that would make hearts bleed while remaining professional?

Step 1. State Your Reason

State in your letter why you could not make your payments like how you used to, or why you are delinquent. If it’s because of a medical condition, tell them straight out the “when” and “what then” of your situation. For example, you could say to them that you recently received a dismissal letter and could not make any payments for the time being. Don’t try to make it longer than necessary. That, in itself, is already enough for reasons we will state later.

Step 2. State Your Request

Specify what kind of help you are needing. Most of the time, people write to request for a loan modification. That means they need help in modifying the dollar amount of their payments initially written in their loan agreement. If, though, you could not make your payment at all, then state that you are requesting for help on putting your payments to a halt until you find a source of income.

Step 3. State Your Plan

No lender or creditor will agree to a loan modification request if you don’t have a plan on how or when you can make your payments again. Don’t make a promise like “making my payments again once I win the lottery.” Make your plan concrete, realistic, and doable. Something like “getting a second job” or “applying for a personal loan” would suffice. It would be great, too, if you can state a timeframe on when you can put your plan in motion.

Step 4. Keep It Short

Don’t make it wordy. A human’s attention span can only last for a few seconds. If your letter is worth two pages, your creditor would not want to read that, especially if he knows it’s a hardship letter. Try to keep it all on one page, and don’t drag your explanation.

Step 5. Attach All Supporting Documents

It’s easy to explain your situation in writing, but your financial institution would require concrete proof of the hardship that you are experiencing. With that, attach all the documents you have–medical bills, medical certificates, receipts, final payslip, certificate of employment–that will support your claim regarding your situation.

As long as your situation is genuine, your financial institution will find a way to help you settle your payments. At the end of every good letter (approval letter or consent letter), never forget to thank them for the help that they will be giving you. Whatever hardship you are experiencing, never give up. As the saying goes, “A river cut through a rock not because of its power but because of its persistence.”