Financial hardship assistance comes in many forms for many types of loans. It is a general term used to describe options like refinancing, deferral or forbearance on debts. There is no one way to determine if you will qualify. Much of the process for qualification depends on your lender and your loan situation. However, there is no harm trying to secure hardship assistance if you feel you may default on your loan without it. There are four major elements to any hardship request.
Honest Effort to Repay Debt
The first thing you must show is that you have made an honest effort to repay your debts thus far. If you have a record of missed payments, this will be hard to prove. Essentially, a lender will not want to work with you if you were not willing to work with the lender in the past. The lender will have a record of your payments, but it does not hurt to provide your record to them in addition. You can typically access your loan online and show all of your paid debts. You may also provide a copy of your credit score, which will show your payments each month.
You will need to show you are experiencing a financial emergency that will prevent you from continuing this good record of payment. Examples include job loss, injury, illness, and divorce and other unexpected family problems. Show the event was outside of your control and that you can no longer live on your salary while making payments toward the loan. If the lender thinks you simply budgeted poorly, took on too much other debt or want to negotiate a better term for your personal benefit, you will not likely get approval. You have to show you actually can no longer afford the loan.
Indefinite Period of Hardship
If you are likely to exit this emergency within a month or two, your lender is less likely to fulfill your request. Wise borrowers should save enough money to meet debts for at least three months if they experience a financial emergency. This means saving three months' salary for most people. A lender expects this level of responsibility from you. Therefore, your situation should present a lengthy problem that cannot be covered with this emergency fund. Unemployment, then, is only an excuse if the job market is very challenging and you are not likely to replace your income within a few months.
Request for New Terms
You should end your letter by giving a specific request for new terms. For example, it is a good idea to give an exact amount you believe you can afford to pay each month. You should also give an end date, such as 6 months in the future. If you are requesting deferral, this end date becomes even more important. Making an open-ended request for financial hardship assistance reduces the likelihood your request will be granted. Alternatively, it could create a scenario in which the lender will grant your request but provide terms that still may lead to default because they are not lenient enough.