Learn how to write a letter of explanation for declining income. Use our sample letter of explanation for declining income as a template for your income explanation letter.
Sample Letter Of Explanation For Declining Income
[Name of Applicant]
[Address of Applicant]
[City, State and Zip Code]
[DATE
[Name of Lender]
[Address of Lender]
[City, State and Zip Code]
RE: Explanation of Declining Income
Dear [Name of Lender]:
I am writing this letter to explain my declining income from [YEAR]. At the time, my wife had just been diagnosed with kidney cancer.
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She had been laid off from work five months previously, which meant that our financial situation was already precarious.
Mine was the only income in the household. I was just barely keeping up with the usual bills after the loss of my wife’s income.
When she became ill, our medical expenses skyrocketed. Her need for surgery and ongoing medication were critical, but our medical insurance was not sufficient to cover all of the expenses.
My wife’s surgery was successful, but a long recovery period was required. I did the best that I could to pay as many bills as possible.
However, it soon became clear that I would be unable to cope. This led to our bankruptcy filing in [YEAR].
Things have improved since then. I have received annual raises, and my wife has fully recovered from cancer and has been able to go back to work part time.
Our credit history since the bankruptcy is relatively limited, but all of our bill payments since the bankruptcy discharge have been on time.
Thank you for your consideration of my loan application. You may reach me at [email address] or [phone number] at any time if you have questions.
Very truly yours,
[Signature of Applicant]
[Printed name of Applicant]
List of enclosures (if any)
Frequently Asked Questions (FAQs)
Q: What is a Letter of Explanation for Declining Income?
Answer: A Letter of Explanation for Declining Income is a document that explains to a lender or creditor the reasons why your income has decreased. This letter is typically used when you are applying for a loan or credit card and your income has recently decreased.
Q: Why would I need to provide a Letter of Explanation for Declining Income?
Answer: If you have experienced a decrease in income, lenders or creditors may view this as a risk when considering you for a loan or credit card. Providing a Letter of Explanation for Declining Income can help to mitigate this risk by explaining the reasons for the decrease in income and reassuring the lender or creditor that you are still financially responsible.
Q: What should I include in my Letter of Explanation for Declining Income?
Answer: Your Letter of Explanation for Declining Income should include the following information:
Introduction: Start your letter by introducing yourself and explaining why you are writing the letter.
Explanation of the decrease in income: Explain the reason(s) for your decrease in income. This could be due to a job loss, reduction in hours, or a decrease in commission or bonuses.
Details of the decrease in income: Provide specific details about how your income has decreased. Include information such as the percentage of decrease, the duration of the decrease, and any supporting documentation you have.
Explanation of how you have adjusted your budget: Explain how you have adjusted your budget to accommodate the decrease in income. Provide details about any cost-cutting measures you have taken, such as cutting back on expenses or finding ways to increase your income.
Reassurance of your financial responsibility: Close your letter by reassuring the lender or creditor that you are still financially responsible, despite the decrease in income. You can do this by providing information about your credit history, savings, or other assets.
Q: What are some tips for writing a strong Letter of Explanation for Declining Income?
Answer: Here are some tips for writing a strong Letter of Explanation for Declining Income:
Be honest and transparent: Explain the reasons for your decrease in income in a clear and honest manner. Lenders or creditors will appreciate your transparency.
Provide supporting documentation: If you have any supporting documentation, such as pay stubs or a letter from your employer, include it with your letter. This will help to reinforce the validity of your explanation.
Be concise: Keep your letter concise and to the point. Lenders or creditors are busy and don’t have time to read a long, rambling letter.
Use a professional tone: Use a professional tone throughout your letter. Avoid using slang or informal language.
Proofread your letter: Before submitting your letter, proofread it carefully to ensure there are no typos or grammatical errors.
Q: Can a Letter of Explanation for Declining Income improve my chances of getting approved for a loan or credit card?
Answer: Yes, a well-written Letter of Explanation for Declining Income can improve your chances of getting approved for a loan or credit card. By providing a clear and honest explanation of your decrease in income, you can reassure lenders or creditors that you are still financially responsible and capable of repaying your debts