Loan Modification Hardship Letters – The What, How, and Why

Loan Modification Hardship Letters – The What, How, and Why

The current trend for the salaried class is to live on borrowed money. This has been made easy with the banks and other financial institutions offering attractive loan packages to such people. This often takes the form of housing loan, vehicle loan, educational loan and personal loan.

Of course, with sufficient collateral the banks or financial institutions have no qualms in giving out these loans to anyone in need. But there may be instances when some kind of hardship would force the borrower to apply for loan modification or default.

In the event of hardship, the monthly repayment plans are upset. This is the point at which a good loan modification hardship letter is needed to bring one’s sorry state to the attention of the creditor. Such a financial hardship letter would explain to the creditor the causes that led to the financial troubles of the borrower and request for help from the creditor to modify the original terms and conditions to facilitate easy monthly repayments under the changed circumstances.

The more important of the reasons for writing financial hardship letter for loan modifications are, unforeseen medical expenses, child’s college education, credit card debt, divorce, other legal entanglements, death of a co-borrower, sudden retrenchment from job or temporary lay-off, salary cut caused by demotion or poor business in the industry, or any other natural disaster classified as ‘act of God’. All these would be genuine grounds for initiating a hardship letter.

Before any action on the modification of loan can be initiated by the creditor, the starting point is invariably the hardship letter. As with any letter of this nature, to carry a punch, it has to be precise, concise and extremely courteous in the style of appeal. This has to be accompanied by all relevant and supporting documents to make the loan modification application letter complete, not to mention the other financial documents when the loan was sanctioned originally.

Honesty and humility as always is the best policy. A case that is presented in complete honesty, with clarity of thought in presentation, is bound to be successful. The loan modification hardship letter should drive home the point that the borrower qualifies for loan modification assistance and convince the creditor that the borrower has no other means of assistance to stay financially afloat. Also convince the creditor of the events beyond the control of the borrower that had resulted in his financial disaster.

Also write genuinely about the need to continue to avail the attractive loan facility of the lender and that their compassionate consideration is needed to modify the terms and conditions to make the loan package more affordable for the borrower. It is always better to do these loan modification hardship applications by the borrower himself rather than seek professional help of an intermediary like a lawyer or financial consultant. But of course, should there be serious complications and difficulty in logically thinking out and structuring the loan modification hardship letter that would find an appreciative audience at the lending institution, professional help may be sought, albeit at a price.