“Navigating Financial Hardship: A Guide to Writing a Hardship Letter”

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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?

A hardship letter is a way to express to a creditor that you’re facing financial challenges and seeking flexibility or changes in your terms from your lender or creditor. Generally, creditors consider a financial hardship to be an event or circumstance that is beyond your control, such as:

• Loss of employment
• Reduction of income or work hours
• Job transfer
• Military transfer or deployment
• Divorce or separation
• Death of a spouse
• Medical expenses from a severe illness or injury
• Natural disaster

Certain circumstances are typically not viewed as hardships by lenders or creditors because they are deemed preventable or within your control. Examples include voluntary change in employment, luxury purchases, personal investment losses, costs for higher education, and expenses for criminal legal proceedings.

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, whether it is a job loss, divorce, medical emergency, or another unexpected hardship.
• Highlight how you’re being proactive: 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 along with your hardship letter 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 and put this difficult period behind you, 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: Aim to save at least three to six months of living expenses in an emergency fund.
• Paying down debt: High-interest debt from credit cards, personal loans, and other forms of credit is a drag on your finances. 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, which determines your eligibility and interest rates for mortgages, auto loans, and other important purchases. Regularly review your credit report and credit score to see where your credit stands and identify potential areas of improvement.

At O1ne Mortgage, we understand that financial hardships can happen to anyone. If you need assistance with your mortgage or have any questions, please call us at 213-732-3074. Our team is here to help you navigate through these challenging times and find the best solution for your needs.

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