There are many reasons a person may need to reduce their credit card, mortgage, car loan or other debt payments. The most common reason is loss of income because of loss of job or because a spouse lost his or her job resulting in their monthly income being reduced.
A consumer can write a debt reduction request letter to his or her creditor to ask for lower payments for a specified period of time or to ask for a lower interest rate. Whatever the request, the result should be lower monthly payments.
The debt reduction letter should clearly state that the borrower is fully aware of his or her debt and any interest and fees, and has every intention of paying it. This sends the message to the collection department that the person is responsible and opens the door for cooperation with debt negotiation.
Explain The Financial Difficulties
The letter should explain the financial difficulties that have created the problem without sounding complaining. The tone should be matter-of-fact and not include any threats such as the possibility of declaring bankruptcy if help is not given.
The letter should also offer a solution that is fair and reasonable for both the borrower and lender. Most creditors would rather work with a borrower than start extensive debt collection proceedings. However, a letter requesting forgiveness of the debt is not likely to succeed.
Whatever the borrower promises to do in the letter such a search for a job is a commitment towards repaying the loan. They should keep the commitment and honestly pursue any promises made.
The tone of the letter should remain courteous and respectful and explain that the sender would be extremely grateful if his or her payments were reduced for a specified time. The sender may explain that they are unable to make the current payments, but they should not express it in a hostile manner.
If the debt is credit card debt, the borrower may first speak to the credit card customer service representative and ask about payments owed and late fees. Once they know how much they owe, borrowers can determine the amount they can afford to pay each month.
If the customer service representative cannot or will not negotiate the debt, the borrower should ask to speak to a supervisor who may have the power to be more helpful. If the borrower gets no help through a phone call, they should write a debt reduction letter.
Consult a Debt Counselor
If the consumer wants to consult a debt counselor before writing a debt reduction request letter, he or she should make sure the counselor is reputable. A reputable credit counseling agency will give you free information about its services before asking you for any of your personal financial information.
If an agency asks for your financial information first, it should be considered a warning and the consumer should go elsewhere. Consumers can get a list of approved credit counseling agencies from the United States Trustee Program.
The letter should request that the unpaid debt not be mentioned to a credit agency. If the debt is not paid for 180 days, the creditor may write it off as a loss, but the consumer’s credit report will be drastically lowered, and they will still owe the money.
Below is a sample debt reduction request letter. It should be written in formal business letter style and sent by certified mail with a return request. This is the way in which the sender will have proof that the letter was received. The sender should keep a copy of the letter and any other communications connected with the request to reduce debt payments.
Sample Debt Reduction Letter
Name of Borrower
Address of Borrower
City, State, Zip Code
Account Number of Borrower if Applicable
Name of Creditor
Name of Lending Institution if Applicable
Address of Lender
City, State, Zip Code
RE: Debt Reduction Request
Dear Name of Creditor:
This letter is to formally request a reduction in payments on my debt for the next six months. I request to pay AMOUNT starting on DATE and beginning the normal payments on DATE. I have every intention of paying my debt, but am not able to make the usual payments at this time.
I lost my teaching job because of financial cut-backs in my school district. I am well-qualified for teaching biology and hope to have another job within six months. I am looking in two other school districts near where I live.
Because I have every intention of paying my debt, I would like to request that you not give it to a collection agency. I need to maintain my credit rating.
I hope to receive a favorable reply in writing within the next two weeks. If you have any questions or would like any more information about my situation, I can be reached at Phone Number or at Email Address.
Thank you for your kind consideration in my time of difficulty.
Signature of Borrower
Printed Name of Borrower