It may not always be that a debt owed is repaid strictly in time. Some lenders often also take advantage to delay remitting the payments. In either case, you will usually have to draft the demand letter for payment. This is a letter that, in its basic form, requests a lender to settle the associated dues.
Other than asking the recipient to settle some dues, the letter also specifies the courses of action that may be taken in the event of a complete default. This letter is drafted by a creditor and addressed to a debtor. It also goes by other names like:
- Final demand for payment
- Demand letter of payment
- Demand letter
- Letter of demand
When is a Demand Letter for Payment Required?
Not every circumstances requires a demand letter for payment. Some payment issues may easily be rectified by simple phone calls, invoices, or ordinary letters of correspondence. Only those critical issues that are not able to be handled normally demand this letter. They are:
Delayed Payment
If the debtor does not refund the money owed within the stipulated timeframe, you may draft this letter principally as a reminder. In this role, the letter also serves to explain the various courses of action that may be taken if the debtor does not honor the obligation.
Complete Defaults
Yet again, if the debtor completely defaults on making the stipulated payments, he may have to be summoned and asked to do the same via this letter. The letter here is mainly used to sound a threat of action that was agreed upon before the contraction of that debt obligation.
Zero Communications
As we said earlier, the demand letter is never used in all circumstances of debt repayment. It mainly comes in handy when the circumstances squeeze the lender to the wall. One such is the existence of zero communications from the debtor even after drafting numerous reminders.
Errors in Accounting
Under some special circumstances, it could be that the lender repays every amount owed. However, the amount had some errors and issues and was hence inaccurate. This may call for the drafting of this letter principally to rectify the accounting issue. It lacks any threat when used to fulfill this particular role.
Need for Refund
The opposite could be true. It could be that you are the one who owes money but paid out more than what you were supposed to pay. In this case, you draft the letter to the creditor and ask him to refund you the extra amount of money you paid.
What is Included in a Payment Demand Letter?
Regardless of the amounts of money owed, and the circumstances under which these letters are used, some standard pieces of information have to be included in them. Here below, we look into some of these issues and why they have to be incorporated in the letter:
Party Information
The parties here refer to the people who were involved in the debt obligation. They include the person owed, the lender, and any witness who was involved in the process of procuring the debt.
Date when the debt was incurred
It is the date when the debt was officially incurred. It includes that day when the work for which the amount is demanded was officially completed or the good officially supplied to the customer.
Date when the debt was improperly charged
In case the dispute revolves around an overcharge for a good or service, the date when the same happened is assumed to be the official date when the debt was incurred.
Precise details of the debt
Every debt instrument has a structure that is basically a breakdown of the finer details of the said debt. These include such details as the amount borrowed, the grace period, the interest and the periodic installments, and the repayment periods.
Details of any attempts to collect the debt
If any attempts had been made previously to recollect the debt, the same has to be expressed in the letter. They have to be accompanied by relevant documents and other references that vouch for the same. These references include such things as previous mails, phone calls, emails, invoices, and general inquiries.
Expectations for the payments
The term ‘expectations’ here refers to what exactly you are looking up to, going forward. It could include renegotiation of the terms of the debt, the settlement of the debt obligation by a stipulated timeframe, the reduction of the interest rates, and so on.
Consequences for non-payments
Here, you have to state what you plan to do in case the lender does not honor the obligation within the required timeframe. They could be surcharges, listing in the credit reference bureaus, and the referral of the matter to the debt collection agencies.
Relevant Signatures
After concluding the letter, the writer has to append his signature. This has to be accompanied by those of the witnesses or any other person who was involved in the contracting of the debt instrument.
Examples of the Breakdowns of Contents
| Party Information | From: Cecil Credits to J.T Emerson |
| The date the debt was incurred | Soft Loan worth $1,500 that was advanced on February 6th, 20XX |
| Details of Debt | As per our agreement, you were to have a grace period of only one month, after which you were to start repaying the date thereafter. The last installment was to be paid within two months. Today marks the end of the two-month period we had initially agreed upon. |
| Details of Prior Attempts to collect the debt | I drafted you a communique exactly one month after we signed the contract. You, however, did not respond in any shape or form. I sent out another one last week (check your records) yet again without any ensuing rejoinder. |
| Expectations of Payment | In line with our agreement, you are supposed to pay me back the full amount by close of business today. Since that is not forthcoming, I will have to refer you to the credit reference bureau and bring in some debt collectors. |
| Consequences | I will not hear from you within a week, and I will have no choice but to bring in the law enforcement officers to help me out. |
Sample Letters & Templates
Sample Payment Demand Letter
DEMAND LETTER FOR PAYMENT
Your Name
Your Address
Your City, State Zip Code
Your Phone Number
Your Email
Date
Name
Title
Organization
Address
City, State Zip Code
Respected Mr. /Ms. Last Name:
Re: Demand Letter for Payment
If your memory serves you right, and which I suppose that it should, we entered a debt obligation on April 6th, 2019. The amount in question was $10,000, which you had to repay within 13 months.
As per the agreement, you had to enjoy a 1-month grace period, after which you had to pay back the debt and the associated interests in monthly installments for a period of 12 months ending May 6th, 2020.
To date, I have received no formal communication with you as regards the issue. As a matter of fact, I communicated to you thrice on August 6th, 2019, November 6th, 2019, and February 6th, 2020, respectively.
None of my attempts to reach out to you bore any tangible fruits. I have now been left with no other option but to write to you to compel you to honor your obligation.
Please note that failure to get back to me within a fortnight shall mean me bringing in the law enforcement agencies to deal with you.
Regards,
Signature (hard copy letter)
FirstName LastName
Templates & Examples
How to send a Demand Letter
Drafting the letter in and of itself is not enough. You no doubt have to send it out to the intended destination for it to be acted upon. This entails the following three main procedures:
Step I: Gather the necessary pieces of information
You have to start by gathering the necessary pieces of information. These pieces of information are those that vouch for the existence of the debt instrument and the need for the same to be settled.
Some of the must-have exhibits are the debt contract itself or the receipts for the amounts owed. You have to preferably attach them to the body of the letter that you eventually draft.
Step II: Draft the demand Letter for Payment
Now get to the core of the business. It is at this stage that you piece every bit of evidence together to create a unifying narrative. The best way to go about it is to make some veil threats, albeit using polite languages.
The ‘threat’ may be available in the following ways and means:
- Use of Debt Collection Agency – Tell them that you will use a debt collection agency to recover your Loan if they default. Responsible individuals and corporate entities who care for their reputation will do whatever they can to avoid being referred to these institutions.
- Hot Discounts – Offer some hot discounts to the debtors. Tell them that if they repay the whole amount by a certain deadline, you will grant them some discounts. This is to entice them to make some effort at least.
- Renegotiate the Installment Payments – You may also offer to renegotiate the installments and the amounts of money they have to part with at that time. This, again, will ease the burden to let them repay the debt comfortably.
- Suggest referral to the Small Claims Court – Like the debt collection agencies, the Small Claims Courts will also usually come in to help with recovering your money. Many responsible firms and individuals will also fear being referred to there. That threat will also serve to awaken them to act.
Step III: Send the letter
Having drafted the letter, you now have to send it out to the intended recipient. The use of the certified mail is by far the most recommended for this job. That is because it provides electronic verification that the letter was indeed delivered to the intended recipient.
In the event that the recipient does not receive the letter for whatever reason, the same is returned to the sender at no extra cost. To add to these, the means of delivery itself is safer and less prone to the risks of parcel loss and other issues that arise in the course of making a delivery.
The Tone of the Demand Letter for Payment
Even though you have every reason to get wild, it is not advisable for you to express these emotions in this letter. You should always see to it that you maintain your claim. The language you use, as well as the tone thereof, has to be polite, respectful, and devoid of direct threats.
Frequently Asked Questions (FAQs)
We now take our time to look into some of the frequently asked questions that surround this Demand Letter for Payment. These questions are to open your eyes and address the issues that arise with the use and issuance of this letter.
As we have already explained above, the tone of the letter need not necessarily be forceful and rude even though you have every right to be wild. Instead, it should be less assertive, polite, and kind. As part of making this possible, you also have to state the exact reasons and references for demanding the payment to be processed.
A ‘payment demand letter’ need not necessarily be notarized. Nonetheless, if you intend to file a claim in a court of law, you may have to notarize it as proof of the contents that are indicated therein. Furthermore, the process of notarization also vouches for the facts that are stipulated therein.
You now know how to go about the issue of drafting a demand letter for payment, don’t you? Well, we have no other issues to explain or spell out. All we are left to do now is to pass the ball on your court. Take advantage and make use of the pieces of information we have furnished to demand your payments effectively going forward.
