Financial Hardship Letter
Explains a change in circumstances to a lender and asks for time.
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I am writing about the account above. My circumstances have changed and I want to tell you before I miss a payment rather than after.
[what changed] This began on [date].
I am asking for [what you are asking for].
how you expect it to resolve
I am not asking to write anything off. I want to keep paying, at a level I can actually sustain, until things recover. Please confirm in writing what you can agree, and what it means for my credit file.
What is a Financial Hardship Letter?
A hardship letter tells a lender or creditor that your circumstances have changed, what changed, and what arrangement you are asking for. Lenders run processes for reduced payments, payment holidays, interest-only periods and term extensions, but those processes are triggered by disclosure — a missed payment on its own simply reads as a default. Putting the reason and a proposal on file gets the account looked at by a support team rather than passed to collections, where the options are narrower.
It is written by homeowners after redundancy, reduced hours, illness in the family, a bereavement or a business downturn, and by borrowers on car finance, card debt, student loans and personal loans. Landlords receive versions of it from tenants. In the US it is a standard component of a loss mitigation or short sale package and the servicer will often specify what it must contain. Wherever it goes, the reader is an assessor working through a file, not the relationship manager who sold you the loan.
Forbearance is regulated, and the rules differ. UK lenders are subject to Financial Conduct Authority rules on customers in financial difficulty; US mortgage servicers follow the Consumer Financial Protection Bureau's loss mitigation framework and the investor guidelines for the specific loan; India works within the Reserve Bank's restructuring framework; Australia's National Credit Code gives a right to give a hardship notice and sets a period for the credit provider to respond. Check what governs your loan type and lender before assuming you have an entitlement.
The letter does not pause anything. Nothing changes until the lender agrees in writing, and payments missed in the meantime are still missed. It does not erase arrears, and interest normally continues to accrue on the outstanding balance, so a payment holiday usually costs more over the life of the loan. It does not protect your credit file — reduced arrangements are commonly reported. And it is not debt advice. Free services exist in most countries, including StepChange and Citizens Advice in the UK, housing counsellors approved by HUD in the US and financial counsellors in Australia; take your numbers to one before you commit.
What to put in a Financial Hardship Letter
These are the details this template asks for. Anything left blank is marked in red on the preview so you can see what is still missing.
| Field | What goes in it |
|---|---|
| Issued to (full name) | For example: James Whitfield |
| Home address | For example: 588 Kinnear Road |
| Who you are writing to | For example: Kinnear Building Society |
| Organisation address | For example: 1420 Kinnear Road, Columbus, OH 43212 |
| Account or reference | For example: Mortgage 4471-889 |
| What has changed | For example: I was made redundant on 15 August after nine years and my final salary was paid at the… |
| When it started | Free text |
| Where you stand now | One per line: What | Figure |
| What you are asking for | For example: a three-month reduced payment of 400 a month while I find work |
| How you expect it to resolve | For example: I have two second-stage interviews this month and expect to be earning again by November.… |
| Currency | Free text |
How to write a Financial Hardship Letter
Name the account and the event
Open with the account or loan number, the property or asset it relates to, and the single event that changed things: my hours were cut from 38 to 22 on 3 February. Assessors are matching your file to a category, and a specific dated event does that faster than a paragraph of context. Save the background for the second paragraph, where it explains rather than delays.
Say whether it is temporary or permanent
State how long you expect the situation to last and what you are basing that on: a fixed-term contract that ends in September, a treatment plan with a stated return-to-work date, a business with a signed order due to start next quarter. Temporary hardship points towards a payment holiday or a short reduction; a permanent drop in income points towards a term extension or a restructure. Being honest about which shapes the offer you get.
Show the numbers on one page
Give net monthly income, essential outgoings, other debts and what is left. Use real figures, not rounded reassurance, and include the other creditors you are also approaching — lenders expect a fair share of what you can afford rather than everything. If your figures are on the lender's own income and expenditure form, attach it rather than duplicating it in prose, and make the letter point at the form.
Propose a specific arrangement
Ask for a defined arrangement: three months at a reduced payment of a stated amount, then a review; interest-only for six months; a term extension. A concrete proposal gives the assessor something to accept, amend or counter, and it shows you have done the arithmetic. Asking for help without a number invites a standard letter back asking for a number, which costs you a month you do not have.
Attach evidence and keep it current
Include what supports the story: a redundancy letter, payslips before and after, a benefits award, a medical certificate, business accounts. Note the date on each. Then diarise a follow-up: hardship files go stale, and lenders often ask for updated income evidence before finalising. Send the update before they chase, because a file waiting on a document is a file that keeps accruing arrears in the meantime.
Common mistakes
- Writing after three missed payments rather than before the first, by which point the account may have moved to collections and the softer options are gone.
- Giving a general account of a difficult year instead of one dated event with figures, which leaves the assessor unable to place the file in any category they can act on.
- Asking for help without proposing an amount, so the reply is a form requesting the amount and another month of arrears accrues.
- Assuming the requested arrangement is in force and reducing your payments before the lender has agreed in writing, which is recorded as arrears rather than forbearance.
- Overstating what you can afford to seem cooperative, then breaking the arrangement, which makes the lender far more reluctant the second time.
Frequently asked questions
What is a hardship letter?
A letter to a lender or creditor explaining a change in your circumstances, showing what you can afford, and proposing a specific temporary or permanent change to your payments. It is the document that moves an account from ordinary arrears handling into the lender's financial difficulty process, where options such as reduced payments, interest-only periods and term extensions are considered.
How long should a hardship letter be?
One page is usually right, with a supporting income and expenditure schedule attached. Assessors read many of these and the useful content is narrow: which account, what happened and when, whether it is temporary, what you can pay, what you are asking for, and what evidence is attached. Extra pages of narrative do not increase sympathy and can bury the figures the decision actually turns on.
What counts as hardship?
Commonly recognised situations include job loss or reduced hours, illness or injury, the death of a family member, relationship breakdown, a business downturn, and disaster damage to a home or premises. Lenders publish their own criteria and regulators in several countries set out what must be considered. Check your lender's financial difficulty page for the categories it works with before deciding your situation does not qualify.
Will a hardship arrangement hurt my credit file?
It may. A reduced or paused payment arrangement is usually reported to credit reference agencies and can be visible to future lenders, although the treatment differs by country and by scheme. It is generally reported differently from unmanaged missed payments. Ask the lender in writing how the arrangement will be reported before you agree to it, and check your own file afterwards.
Should I write before or after I miss a payment?
Before, if you can see it coming. Lenders have more to offer on an account that is current or barely in arrears, and an early letter often prevents the fees and default markers that follow a missed payment. If you have already missed one or more, write immediately rather than waiting until the position looks tidier — the arrears keep growing while you prepare.
This page explains general practice and is not legal advice. Requirements differ between countries and, in some cases, between states — check what applies where the document will be used.