There’s a myriad of reasons why you may be unable to service a loan or repay a debt. If after trying everything you can to pay a debt but are unable, there are very few things you can do, one of which is writing a loan forgiveness letter.
A loan forgiveness letter is written to a creditor to forgive a debt owed. While this is one of the few recourses left in a situation like this, it doesn’t come without its downsides, which include e but aren’t limited to paying a fee or even a negative listing on your overall credit score.
Depending on how severe your situation may be, those may not mean much. Regardless, it would be best to speak with a professional about the implications of forgiving a loan before writing a loan forgiveness letter.
Writing a debt forgiveness letter does not guarantee your debt will be forgiven. Depending on how well-written the request is, how compelling your case, and ultimately, the creditor's decision, your debt can be forgiven entirely, or your creditor can have a part of it written off as a loss.
In this article, we will list everything you need to know about writing a debt forgiveness letter and common reasons for writing one and tie it off with a sample to help you write it.
What Is a Loan Forgiveness Letter?
A loan forgiveness letter is a written request sent to your creditor explaining your inability to pay off a loan and requesting that your creditor forgive a portion or the entirety of the loan.
Depending on several factors, your creditor may decide to forgive the loan. In all of this, how well-written your letter is has a significant role in ensuring your debt is forgiven.
Common Reasons for Writing a Debt Forgiveness Letter
A “cancel your debt” letter is a letter written to explain your financial difficulty as it ties to your inability to repay a debt. If your reason isn’t deemed “worth enough,” your debt may not be forgiven.
Here are some common reasons why people write debt forgiveness letters:
- Jail term: A jail term affects almost every area of your life, including your ability to repay a debt. While this is a good reason to write a loan forgiveness letter, deepening on the reason for your sentence may only aggravate the creditor.
- Bankruptcy: Declaring bankruptcy is easily one of the most significant causes of defaults. Using this in your letter and all the relevant details attached would automatically explain your inability to honor the loan.
- Death in the family: A death can affect your income in many ways. You may have spent a lot trying to nurse the deceased back to health, or they may have brought in some of the income that is no longer available.
- Health-related issues: An illness can affect your income at unprecedented levels. Anything that affects your income automatically affects your loan repayment.
- Divorce: While a divorce takes its toll emotionally, it also does financially. Explaining how divorce has affected you financially is grounds for requesting loan forgiveness.
- Relocation: A relocation can affect your ability to service a debt.
- Income-related issues: This may range from working fewer hours, rising inflation, and even losing your job. These reasons affect your income and directly affect how well you service your debts.
- Unsuccessful endeavors: If a debt was specifically taken for the sake of a business, the repayment of the debt relies heavily on how well the venture performs. The failure of the business affects your ability to repay the loan.
How to Write a Debt Forgiveness Letter
Here’s a step-by-step guide to everything you need to know to write a debt forgiveness letter:
Reason You’re Unable to Make Payments
This is the section of the letter where you state one of the points listed above. When doing this, you must be careful not to overstate the facts. Your best bet is to state things accurately while trying to appeal to their sympathies.
If you make the mistake of falsifying your reasons, you may create problems when the truth surfaces, leading to more problems for you.
Your Current Financial Status
The next phase of your letter is to indicate how your reason affects your financial status. If your current predicament has cost you certain amounts of money, include how much in this section of the letter. The goal of the letter is to get your debt forgiven, and you should employ anything that could help your case.
To make your case more believable, you should include hard proof. This can range from copies of bank statements, hospital records, and reports. As much as you may want the creditor to, they can’t take your word for it. Providing this proof ultimately makes your case more believable.
Propose Payment Alternatives
Writing a debt forgiveness letter doesn’t mean you get 100% debt relief. To increase your chances of success, you should inform the creditor how much debt you’re willing to repay and how you intend to make this payment. In this case, the creditor lets go of a portion of the debt while you must still pay a certain amount.
If you have other alternatives to help with the debt repayment, state these as well. This can be asking the creditor to take out the interest, extend the repayment period, or reduce the interest rate. Including these alternatives helps the creditor make a decision.
Include a Call to Action
In this section of the letter, you thank the creditor for their time and open an avenue for conversation.
NB: Your tone is the most important thing to remember when writing a loan forgiveness letter. The aim of the letter is to plead to the sense of mercy of the recipient. This means your letter should be respectful and polite.
Loan Forgiveness Letter Template One
(Your Name) (Your Address) (City, State, Zip Code) (Date) (Name of the creditor) (Address of creditor) (City, State, Zip Code) Dear Sir, I write this letter with great regret to notify you that I cannot repay your credit as per our original agreement. I did everything I could to repay up until losing my job early and have survived on unemployment benefits ever since. I was the head distribution officer at XYZ Pharmaceuticals, handling all distributions until I was fired. Early this year, the company got into hard times and, as a result, had to lay off over 70% of its workforce. I have been trying to apply for a job ever since but have been met with denials. Due to this reason, I plead that you forgive my debt as my current financial status cannot help the repayment. Please find attached a copy of my bank statement and employment records. Please respond to this letter when you have the time. You can reach me via email at [email protected] or cell at +111 222 333 444 Thank you for your time and consideration. Kind Regards, (Your name and signature)
Loan Forgiveness Letter Template Two
(Your Name) (Your Address) (City, State, Zip Code) (Date) (Name of the creditor) (Address of creditor) (City, State, Zip Code) Dear Sir/Ma, I’m writing to request forgiveness for my debt with XYZ industries. Due to my current health predicament, I cannot repay the debt as per the original agreement. On the 15th of August 2025, I was diagnosed with early-onset dementia. And have been undergoing treatment since the diagnosis. As a result, I cannot work, and all my savings and earnings are spent on medication and treatment as I have no health coverage. For your perusal, a copy of my medical report and bank statement have been attached to this letter. I sincerely apologize, as this was not part of our agreement. Thank you for your time and consideration. Please do not hesitate to contact me with any questions or inquiries. Kind Regards, (Your Name)
When writing debt forgiveness letters, you need to remember that you’re trying to appeal to the kindness of the recipient. This is why you should employ everything that helps you do this. We’ve included samples to help that can be tailored to suit your needs.