Hardship letters can be used in many situations, but are most common for requesting a loan modification on a mortgage or to start a short sale. If you are asked for a Hardship Letter, or simply feel one might help your case, then use the letter template we’ve provided below as a jumping off point. After the template, we’ll provide tips on how to customize it for your situation.
Financial Hardship Letter Sample
[Your City, State, Zip Code]
[Lender’s City, State, Zip Code]
Re: [Loan Number]
Dear Sir or Madam:
I am writing this letter to explain the unfortunate set of circumstances causing [situation, such as our mortgage to become delinquent]. Unfortunately I continue to fall short and would like you to consider [resolution, such as a short sale or a loan modification].
The main reason that caused [situation] is [hardship]. I can no longer afford to pay what is owed. I have exhausted all income sources and outside resources. As such, I am hoping you will be able to help.
We truly hope that you will consider working with us.
Downloadable Financial Hardship Letter Templates
Financial Hardship Letter Template
How to Write a Hardship Letter
When to Write a Hardship Letter
Chances are, if you are asking for something like a loan modification or short sale, your lender is going to ask why. They’ll want you to provide a hardship letter as an explanation. It’s your chance, in your own words, to describe why you will not be able, for example, to continue paying your mortgage.
Examples of Hardship: What Qualifies
Being in debt or being upside-down on your mortgage isn’t quite good enough to qualify as a hardship. Being upside-down can qualify you for a short sale, but that does not mean the lender will agree to a deal just based on that. Here’s a few situations that do qualify:
- Change in income
- Pay cut
- Partner losing their job
- A new, lower-paying job
- A job transfer
- Military duty
- Illness or medical emergency
- An interest rate hike in an adjustable-rate mortgage — referred to as “payment shock”
As you can see, while most are related to your financial situation, they also have to do with your whole life situation. This list is not exhaustive, but merely serves to illustrate the types of situations that are considered hardships. If your situation has changed drastically and unavoidably, especially affecting your ability to pay, it might be considered a hardship.
Where to Send a Financial Hardship Letter
Chances are, if you are writing a hardship letter, it’s at the request of your lender. As such, you only need to send it to your lender, such as your mortgage holder.
How to Document Your Financial Hardship
Provide any documentation you think will be useful in proving your situation to the lender. When writing, however, it’s best to be concise. Keep it short and to the point. You don’t want to have a rambling sob story, as the letter recipient will likely just start skimming, decreasing your chances of winning them over.
Instead, focus on how you got into the situation and how your ability to pay has changed since originally taking out the loan. Then, tell the lender how you have tried to deal with the situation. Finally, demonstrate how the situation is permanent, or at least lasting long enough to have a significant impact on your ability to pay, and that there is nothing you can do to change your situation.
Under no circumstances should you write about how your situation might improve in the future. If you have disposable income, or are likely to get your life back on track shortly, the lender will not approve the loan modification or short sale. It might be depressing to write about how hard your life is, but that’s the point of the letter. Be truthful, but don’t write about how you hope your life will turn around.
Be specific. Have you sold your car for a junker, while your teenager contributes all the money from their job at a fast food joint, all after having maxed out your credit cards to pay bills? Tell them how much money your credit cards are maxed to. Tell them how much you paid for the used car because you had no money to buy something that will last more than another thousand miles. Remember to use facts rather than flowery language.
Using a Credit Repair Company to Get Forgiveness for Financial Hardship
If you find yourself at a loss striking the balance between explaining your situation and being long winded, it may be a good idea to hire a credit repair company to write the letter for you. They know how to write letters to lenders in order to get the best possible outcome, and will work with the lender on your behalf. They can also help you repair your credit or dispute fraudulent, erroneous, and other negative items from your credit report to help your financial aspects.
For more information on credit scores and what affects them, visit our Credit Score Learning Center.
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