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Late Payment Explanation Letter

Late Payment Explanation Letter
There are several different reasons why a borrower might fail to make timely payments to a lender. In such scenarios, it is prudent to write a letter to the creditor explaining the reasons of the delay. If you have no clue about how such a letter is written, then scroll down and take a look at the sample provided to help you draft one yourself.
Scholasticus K
Last Updated: May 31, 2018
There are several different occasions where borrowers fail to make timely payments of the loans that they have borrowed. Late payments are also observed in case of credit cards and other debt instruments. There are some consequences of late payments, such as fines and additional interest. An explanation letter is usually written in two scenarios, namely, a case where the payment is yet to be made, and the borrower asks for more time, and a case where the borrower has made the payment and is apologizing for the late payment.

How do You Write a Letter of Explanation for Late Payment?

Framing an explanation letter can be a really difficult task, as the letter should signify a genuine reason for the late payment. The basic motive of such a letter is to communicate to the lender the cause of the late payment. The letter must be of course, polite, short, and definite. The following are elements that you need to include in the letter.
  • Reason: The reason for the late payment and financial hardships that you have been suffering in the recent past should be included in the letter. Giving a complete, honest, and transparent account of facts is always helpful, and if the lender is a private lender, he might not even report the late payment to the credit reporting bureau, thereby safeguarding your credit rating and credit report for the time being.
  • Repayment Strategy: You may also chalk out repayment strategies in order to convince the lender about your willingness to make a full and final repayment.
  • Date of Payment: Mentioning the date on which you shall be able to make the payment.
  • Amount of Payment: You may also mention the total amount of your next payment, along with the late fee charges as well as the actual interest. Here you may also resort to some facts such as your salary, or a payment that you are to receive, in order to convince the lender about the payment.
Overall, if you are able to write a really good letter of explanation, you will be able to buy yourself more time, as the lender may not report the late payment, thereby preserving your credit rating. An explanation letter is also a very good proof that you have informed the lender about your inability to pay, and can be useful in case if the lender initiates a foreclosure or a seizure of property.

Sample Late Payment Explanation Letter

The following is an example of a letter of explanation, you may even use it as a template and modify it according to your requirements...

(Your Name and Address)

(Lender's Name and Address)

Subject: Late Payment Explanation, Account No. #33004986ACCDL

Dear Sir,

Form the account number furnished above, you will, of course, derive the fact that I was supposed to make a payment of USD 1,000 with 6% interest on it, on the 7th of the last month. Unfortunately, due to certain financial crises, I have not been able to do so.

When I took the loan from your company, I was employed and had a very healthy debt-to-income ratio. However, due to the recent recessional crisis, my company wound up, and the whole organization was liquidated. I managed to secure a job in my sector, but unfortunately, the debt-to-income ratio dropped drastically. I have enclosed a copy of the appointment letter of my new job as well as my recent salary slip. In spite of the poor debt-to-income ratio, I have managed to make timely payments of the loan.

However, last month my family faced a health crisis, when my elderly father fell ill, and had to be rushed to hospital. In the wake of the event, in spite of the health insurance, the family's income was pressurized, which forced me to default your payment. However, I shall make the due payments (last month as well as current month) in the coming month. The interest as well as the late payment fees of USD 50 would be paid along with the installments.

I sincerely thank you for all the cooperation and sympathy that you and your organization has extended.

Thanking You,

Yours Faithfully,

(Your Name and Signature)

An important point to remember while writing this letter is that you furnish your employer with all possible details and financial statements.