I meet with a group of great women monthly—sometimes we talk business, sometimes it’s purely pleasure, and sometimes it starts with Bloody Marys and ends with Champagne! But for all intents and purposes we are a support group for one another, so last week when one of our group mentioned she was having some serious financial difficulties, we all put our heads together to try and come up with some practical solutions for her.
One of the ideas floated on the table was to get her loans and mortgages adjusted, and for this she’d need to write a hardship letter to each one. Some of us weren’t sure of the concept, and I thought it would be a good topic to explore as so many of us find ourselves in financial difficulty these days that it’s important to have some options.
What is a Hardship Letter?
Sometimes referred to as a hardship affidavit, the hardship letter is a letter you present to your lending institution, bank, or mortgage company that explains your financial predicament, how it’s not likely to be solved anytime soon, and offers some solutions as to how you can manage the situation and not have any assets seized or face foreclosure in the meantime.
Reasons for Hardship
Here are some common causes of hardship when people write to their lender:
- Divorce or separation
- Major damage to the home
- Loss of earnings
- Death of the income-earning spouse
- A new family member joining the household
- Medical bills
- Forced relocation
Whatever your reasons are, you are as entitled as anyone else to ask for a break.
Tips for Writing a Hardship Letter
Between us girls we have a financial advisor, a legal secretary, a salon owner, and a car saleswoman and together, we came up with these seven tips that should help with your hardship letter:
- Hand-Write It
Everyone is used to getting emails now, but how often do we receive a hand-written letter? A handwritten letter will appeal on a human level to the person who receives it and will make it stand out from all the other emails they’ve received.
- Keep it Short
Most people would prefer that you get to the point quickly, so don’t launch into an essay about how you got here in the first place and the things you’ve tried to do to solve it. Mention the relevant points and how this is the only viable solution. Extra details can confuse the situation—if the bank or lender needs more details, they will ask.
- Stick to the Facts
First, present your name, address, account details, amount owed, and any other relevant information, then explain the purpose of the letter. Communicate in enough detail to be clear, but don’t put any extraneous points in there, such as how your ex left you with a cat to feed, or cheated with the town mayor. It won’t help your appeal; it’ll simply muddle it and make it come across too emotional.
- Don’t Blame the Lender/Institution
At this point, you’re asking them for help, so it’s not a good idea to blame them for their interest rates being too high or the fact that they raised their premiums last year. They won’t find themselves feeling too sympathetic if you’re saying they are the cause of your problems.
- Make Sure You Present a Solution
You can even offer more than one. Smaller payments for the short-term and a lump-sum later, a reduced interest rate or a short sale where they will sell your home for a particular sum and let you off with the remaining amount.
- Outline Your Plan for Recovery
Although you’ve fallen on hard times and you need the bank/lender to understand that you really don’t see any way out, you must show them how you plan to put these problems behind you (i.e., I have asked for some extra hours at work, my daughter is looking for a part-time job to assist) and that you’re committed to whatever arrangement you have suggested to them.
Be careful you don’t say things like “My father has a second home and has agreed to sell it,” because they’ll ask you to wait for that. It’s just safer not to say that any family member is going to give you money, as they will simply reply, “Why can’t they do it now?”
- Be grateful
Too many people forget to say thank you in all walks of life these days, but it’s so simple to say. You made an agreement to pay this loan and now you’re asking for a reprieve so a “thank you in advance” or “I’d be really grateful if…” could go a long way.
References and Samples
It’s advisable to write the hardship letter in your own words, as it will come across more heartfelt; you are the best person to explain your situation after all. but there are some sample hardship letters out there and you can also look up your local authority’s examples, such as.
If your financial situation has been affected by a natural disaster, or because you have modified your home due to health of a family member, check out the governments’ list of grants that give financial aid.
We have also provided an example below to help you with the layout of your own.
Sample Hardship Letter
Reference: A/C #1234567
Don and Mary XXX
Phone Number: (###) ###-####
To whom it may concern,
We are writing this letter to explain to you our present financial hardship and to request a modification on our loan.
Don had his hours reduced at work six months ago, so his income has been reduced considerably. He has since been unable to find a full time position to restore his former level of income. I, Mary, work in an office but my income does not support our financial obligations fully. We have also had to take in Don’s brother after their mother died, as he has mental health issues, so the cost of our household has increased. We have maxed out our credit cards simply by doing the grocery shopping each week. We have sold one car but need the other for Don’s work.
We have had a financial meeting on our local community centre where they helped us prepare a budget, and it seems that currently we are overspending by around $xx per month. We have reduced our grocery shopping budget but short of starving, we don’t know how to stay afloat. The figures are below:
Don’s income $xx (20 hours per week/80 per month)
Mary’s full-time income $xx
Total income $xx
Auto loans $xx
Auto insurance $xx
Health insurance $ xx
Credit card payments $ xx
Phone bills $xx
Total expenses not including
clothing or other incidentals $xx
As you can see, we are coming up short by at least $xx per month
We would appreciate the opportunity to work out a loan modification where our interest rate could be lowered for the next year, relieving us of $xx per month. In this time, we will work towards a solution. We will apply for some aid for Don’s brother and Don will also seek part time work to bring up his salary.
Please take the time to review the information we submitted and consider our request. It is very important to us that we keep our account in good standing and preserve our credit rating as well as protect our home.
Thank you in advance for your time and consideration in this matter.