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Understanding and Writing a Hardship Letter

What Is a Hardship Letter?

A hardship letter to a creditor outlines the financial difficulties that have made it challenging for you to continue making your monthly payments. The purpose of the letter is two-fold: to provide your lender or creditor with details of your hardship, including how and when it started and when you expect to recover, and to propose a mutually beneficial solution.

What Qualifies as Financial Hardship?

Financial hardship is generally considered an event or circumstance beyond your control, such as loss of employment, reduction of income, job transfer, military deployment, divorce, death of a spouse, medical expenses, or natural disasters. It’s essential to be open about your circumstances so your creditors can fully understand your situation and determine the most mutually beneficial arrangement.

How to Write a Hardship Letter

When writing a hardship letter, aim to be open and honest with your creditor while maintaining a just-the-facts approach. Propose one or more solutions they can provide that would help you regain your financial footing and repay your debt. Your hardship letter should include the following essential steps:

• Write an introduction: Begin your letter by stating your name, account number, and the reason for your letter—to request financial assistance.
• Detail your hardship: Explain what caused your current financial struggles.
• Highlight proactive steps: Show the steps you’ve already taken to address your financial situation.
• State your request: Clearly specify exactly what it is you’re seeking, such as a temporary pause in payments, a payment plan, or a loan modification.
• Provide assurance of financial recovery: If you’re confident you’ll bounce back financially soon, let your creditor know.
• Submit supporting documentation: Provide supporting documents to help prove the legitimacy of your claim.

To avoid damage to your credit, remember to continue making payments while you wait for your creditor’s decision.

How to Move Forward After Financial Hardship

Once you’re able to return to solid financial footing, it’s wise to take steps to prevent future financial hardships, such as:

• Creating a budget: Budgeting gives you control over your finances by knowing exactly where your money is going.
• Building an emergency fund: Save at least three to six months of living expenses in an emergency fund.
• Paying down debt: Strengthen your financial health by paying as much as possible toward your outstanding debts.

While improving your financial health, don’t forget about your credit. Regularly review your credit report and credit score to see where your credit stands and identify potential areas of improvement.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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