Writing a Simple Letter Explaining Late Payments (with Sample)
Use this sample letter explaining late payments as a template for your formal letter of explanation. Last updated on January 15th, 2019
One of the most important aspects of a person's financial status is his credit report. The credit score is especially vital if a large purchase, such as a home or vehicle, is upcoming. However, everything does not always run smoothly when it comes to finances. Consumers end up making late payments on their bills for a variety of reasons. Unemployment, medical expenses, accidents and other unexpected circumstances can quickly turn a person's financial status from stable to uncertain. Credit Score
It's important for a person to get his credit score in the best possible condition before making a major purchase, but some dings will still remain on the credit report if payments have not been made in a timely manner in the past. When a lending company notices untimely payments, they will ask the consumer to explain why and how these payment problems occurred.
Writing a late payments letter is an important part of explaining to a lender what happened and how these problems will be prevented in the future. Writing this type of letter is not a guarantee that the financing will be approved, but a well-crafted letter will certainly increase a person's chances of getting the funding that he needs.
Even if a person has never crafted this type of letter before, he can create a successful letter by following these simple tips: Tip 1 - Be Pleasant and Polite
All business correspondence should maintain a professional, polite tone. The letter doesn't need to be overly formal, but the writer also does not want to be too casual.
At some point in the letter, it's always a good idea to thank the lending company for their time and consideration. It is also important to keep a positive tone throughout the letter. Avoid using wording that is demanding, harsh or rude, and remember that what is written in a letter cannot be taken back.
Tip 2 - Explain Why Late Payments Occurred
The whole purpose of this letter is to explain why payment problems happened, so including specific explanations is vital. The lending company doesn't need to know every detail of the writer's personal life, but they do need to know exactly what happened so they can make an informed decision.
For instance, a person doesn't need to include personal details about a messy divorce from a cheating spouse. However, she can let the company know that her financial problems were the result of an unexpected divorce that occurred at a time when she did not have a lot of money in savings. Tip 3 - Show Regret for Financial Mistakes
Groveling isn't necessary, but the letter needs to include regret for previous financial problems and decisions. The writer doesn't need to apologize to the lending company if they were not dealing with this specific company in the past. However, the letter should let the lender know that the writer is sorry for not making on-time payments previously.
Tip 4 - Explain Why Timely Payments Will be Made in The Future
The lending company wants to be sure that they will not have to deal with untimely payments if this application is accepted, so the writer should explain why they will be able to pay on time from this point forward.
The writer can let the company know what has changed about their situation, how they have improved the way they handle their finances or how their attitude regarding on-time payments has changed.
Sample Letter Explaining Late Payments Name of Consumer Address of Consumer City, State, Zip Code
Name of Lending Company Address of Lending Company City, State, Zip Code
RE: Late Payments
Thank you for considering my mortgage application. I appreciate the time and effort that my adviser, Ken Willis, has devoted to helping me work through this process.
I am writing this letter to explain why late payments were made to (company name) from (beginning date to end date.) Meeting my financial obligations is very important to me, and I regret that this negative situation ever occurred.
In (date), the company that employed me for 10 years was acquired by another corporation. Because of this merger, my position was eliminated with only two weeks notice. Due to the challenging job market, I was not able to secure full-time employment for almost two years, even though I applied for multiple positions every week.
During this time, my family's finances were strained, and we drained our savings to pay for our daily expenses. We simply did not have enough cash on hand to make our mortgage payments in a timely fashion.
I am thankful to report that I have been working at a new position for over a year now, and my family has regained our financial stability. We have paid off all of our past-due accounts. Now that we've seen how quickly income can change, we have also built up a significant emergency fund to protect us in the future.
Thank you again for considering our application. As you examine our finances, I'm sure you will see that we are very capable of making future payments on schedule.
Sincerely, Signature of Consumer Printed Name of Consumer List of Enclosures