Loan Modification Hardship Letter

A financial hardship is cruel, especially if you happen to suffer from it during an economic recession. This is exactly what happened during the economic recession of 2007-09. Many people who had borrowed loans during the economic booms suffered considerable losses, and had to opt for one option that seems to be the best of all a loan modification. The process of modification of a loan is fairly simple, given that the loan is a secured loan.

What is Loan Modification?

The rate of interest and time period are two important factors that affect the total interest that is to be paid to the lender. The basic logic is that greater the time period lesser is the interest payable and vice versa. So the best loan modification is to increase the time period, which would thereby affect the total interest payable. In some cases, lenders may also reduce the amount that is payable per installment. Another opinion is to bring a stay on the payments for a short period of time. However, this will of course increase the interest payable after the revival of payment.

There are also some other loan modifications that you will be able to work out with your lender. However, there is one very important item on the list of these procedures, drafting a good hardship letter for loan modification.

Loan Modification Hardship Letter Template

In order to draft a good hardship letter you may refer to the following template. The following example is a letter that was written to a lender to plead for a modification. You may also need to make some appropriate changes in the letter according to your financial hardships, while drafting one for yourself.

Name: (your name) Account Number:(your account number) Loan Code:(Code of your loan) To whom it my concern, Dear Sir, I am one your borrower and have borrowed the above mentioned loan. In the recent past I have fallen upon grave financial hardships, due to the ongoing recession. My company initiated a large process and 50 of us, lost our jobs as the entire division was shut down. After lay offs I managed to find a good and assured job, however with a 35% less salary. However, about a month ago my father-in-law suffered from a massive heart attack and had to undergo a genuine surgery, that caused a considerable financial burden, as he did not possess appropriate insurance. Dear sir, I humbly accept my situation and plead my case as I have not been able to make the required payments for the past 2 month. Hence I request you to modify the loan repayment structure so that I am able to make a payment every month that suits my current salary. I apologize for the inconvenience and considerable amount of loss that you are bearing on my behalf. Thanking You, Yours Truly, your name and signature

After receiving a loan modification letter, your lender is bound to call you in for a meeting where you will be able to negotiate the new terms and conditions.