Demand Letter For Payment

What is a demand letter for payment?

Legal definition

A demand letter for payment is a formal written document sent by a person to a debtor, requesting settlement of an outstanding balance or unpaid debt. This document is a clear and professional notice to communicate about the pending debt. In case of a legal dispute in the future, the demand letter serves as legal proof of formal notification for the existing debt.

The parties involved in a demand letter for payment template are the sender and the recipient. Both parties could be individuals, businesses, or organizations. The sender is always a person that requests the debt repayment, while the recipient is the one who is in debt.

A template of letter of demand could be suitable in various situations:

• when the borrower fails to repay the loan or its part by virtue of the existing loan agreement between the parties;
• when the client fails to pay for the provided services under various service provision contracts;
• when the buyer fails to pay for purchased or ordered goods;
• when the guilty party fails to repay compensation (e.g., car accident compensation).

Demand Letter vs. Debt Settlement Agreement

A demand payment letter template is a unilateral document. It means that the document is issued by one person only and represents an official warning about the outstanding debt.

Contrary to that, a debt settlement agreement is a contractual arrangement between the parties regarding the debt settlement. A debt settlement is a process in which the parties agree to reduce the original amount of the debt or to amend conditions according to which the debt shall be repaid.

Demand Letter vs. Acknowledgment of Debt

A demand for payment letter template is a document by which one person informs another person about the existing debt. Once this letter is sent, the recipient may not be aware of the existing debt or deny it completely. Contrary to that, a debt acknowledgment letter is a recipient’s letter of confirmation of the debt. This is an ideal scenario in which the recipient acknowledges the debt and is willing to cooperate for its full repayment.

How to draft a demand letter template for payment?

To get a legally sound demand letter template for payment, include all essential elements listed below:

Details of the Parties

An essential element for every letter of demand for payment template is the inclusion of the sender’s details below:

• full name;
• address; and
• contact information (email or phone number).

Description of the Debt

A vital element of every demand letter sample is a detailed description of the debt. The recipient should be able to understand from the text of the letter the following:

• Origin of the debt. If the debt is pending for the purchase of goods or services, a template of letter of demand shall reflect the detailed description of those goods or services. If, however, the debt arose due to the existing loan agreement, the name and date of the loan agreement should be included in the text.
• Original amount of the debt. This is the amount of a debt that arose, excluding any applicable penalties, late fees, or interest, if ever applicable.
• Due date. Besides that, the demand letter for payment should reflect when the due date for the payment was.
• Total balance (optional). If the outstanding amount of debt includes, apart from the original debt, any accrued interest or penalties, this aggregated sum should also be reflected.

Description of the Next Steps

A demand letter template for payment is the first step in the debt collection process. Therefore, the text of the document should express further intention of the sender. There are a number of things that the sender can claim in the letter, for instance:

• Demand Debt Payment. The sender may establish in the template of letter of demand a period of time within which the debt shall be paid. It should be any reasonable period of time, depending on the amount of debt and the recipient’s financial position.
• Warn about future litigation. The sender may also inform the recipient about the start of a litigation process aimed at collecting the debt.
• Debt Settlement. In rare cases, the sender may offer reconciliation steps aimed at reducing the amount of the debt or suggest other ways of debt settlement.

Signature and Date

Once the demand letter for payment template is ready, the sender shall sign and date it. Putting a signature does not only add additional credibility to the document but also guarantees its legal validity. In fact, without a signature, a document is not legally binding.

After the document is signed, it shall be sent directly to the recipient. Provided there is an existing agreement between the parties, by virtue of which the debt arose, it is better first to check how such a notice should be sent. If the existing agreement is silent or there is no binding document between the parties, then the sender is free to choose either of the options below:

• to send via email;
• to send via mail or courier; or
• to deliver in person.

If you deliver this letter in person, make sure you have written proof of the recipient’s receipt of this letter.

How to customize a letter template at FasterDraft?

To get a fully customized letter template, follow a few easy steps below:

1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format—a template of letter of demand in PDF or Word.
4. Make a payment.
5. E-sign, download, and instantly use a customized template.