No Ability To Make Payments Now

Use this letter to notify a creditor that you have no ability to make payments on debt right now.
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Unable to Pay Loan to Bank Template
No Ability To Make Payments – Sample Letter to Creditors

This is a sample template letter to your creditors explaining that you can no longer make payments at this time. Even though you have no ability to make payments now, before using it, make sure you know how to communicate effectively with your creditors.

Caution: This sample letter doesn’t work for every situation. It’s also important when communicating with creditors to use the term “alleged debt.” Here’s why. Please read this note before using this sample letter.

[Today’s Date]

[Creditor Name]
[1 Downtown Street]
[City, Province Postal Code]




RE: ACCOUNT # 1234 567 890 SMITH, JOHN

Dear [Creditor]:

I am writing to inform you that my current income from [CPP, OAS, Disability Pension, Government Assistance, etc] is not enough for me to be able to make any payments towards my alleged debt at this time.

I respectfully request that you contact me by letter only going forward; please do not contact me by telephone. I will respond to any letters you send to me in a timely manner.

If at anytime I am in a position to resume payments on the alleged debt, I will contact you immediately to make appropriate arrangements.

I thank you for your patience and understanding during this difficult time.

This communication is provided solely for the purposes of notifying you to communicate in writing only and does not constitute an acknowledgement of the alleged debt described above.



[your name]
[complete mailing address]
[phone number]
[account number]


What happens if I just make my minimum payment?

If you only make your minimum payment on a credit card, overdraft, or line of credit, it can literally take decades – sometimes even more than 50 years – to repay the debt. This is because minimum payments aren’t designed to repay the debt. They keep you in debt and allow the lender to make a lot of money. If you find yourself in a situation in which you can rarely or never pay more than your minimum payments, contact us and speak with a credit cousellor. They’ll help you create an optimized, realistic budget, explore all your options (including debt relief options), and then create a plan to get you out of debt within a reasonable period of time.

What you can do when you can't make a loan payment?

If you are struggling to make a loan payment, there are a couple of things that you can do:

  1. Reach out to the lender and see if something can be done to help you through the difficulties you are currently going through. We have a resource on how to communicate with creditors effectively. This may be of some help to you.
  2. Speak with one of our credit counsellors. They can help you create an optimized, realistic budget, explore all your options (including debt relief options), and then create a plan to get you out of debt within a reasonable period of time.
Can I change the repayment rate?
If you would like to change your interest rate on a loan, line of credit, or overdraft, the creditor may require that you basically re-apply for the credit facility. Then the old loan or credit line would be replaced by the new one. This would also likely be required if you wished to lower your monthly loan payments by extending the length of time your loan is repaid over (the term of the loan). In regard to lowering the interest rate you are charged on a loan, line of credit, or overdraft, that’s a discussion you would have to have with your lender. To do this would often require security (collateral) for the credit facility or a co-signer with a much stronger credit score and financial picture. However, if your credit score or financial picture has improved significantly since you initially applied for the credit facility, then there is a chance that you might now qualify for a better interest rate.

An other way to get a much better interest rate and pay off unsecured debts quickly is to go onto a Debt Management Program. It will drop all interest rates to zero or at least significantly reduce them. However, there are some drawbacks to this debt relief program as it’s designed to help people who are really struggling. You can check out the pros and cons of this program here.

When does loan repayment begin?
Loan repayment typically begins 30 days from the day the loan is funded (the day you received the money from the loan). However, you can usually choose a different payment date if you like. For example, if your loan is funded (you receive the money) on the 20th of the month, then your monthly payment would be due on the 20th of every month after that. However, if you’d prefer to make your payments on the 15th instead, then this could be arranged. If you’ve been paying your loan for some time and now wish to change the payment date, you can probably do this too. Just contact your lender and speak with them about this.
What happens if you can't pay your bank loan?
If you are unable to pay your bank loan, then your creditor will take a number of steps over time to try and recover the money they are owed. The first step will be to try and contact you to see what’s going on. If they can see that you’re in a tough situation, then they’ll want to see if it is possible to work something out. If not, they will then contact anyone else who has co-signed the loan and request that this person begin making payments on the loan. If you don’t have a co-signer who is able to pay and many months go by without any payments being made, then the loan will possibly, eventually, be sent to a collection agency to see if they can get you to pay. However, if the loan is secured by some sort of asset or is for a lot of money, then your creditor may refer the unpaid debt to their legal department. They may then decide to repose or sell the asset that secures the loan or take you to court, seek a judgment against you for payment of the debt, and then use the judgment to get your employer to garnish your wages (send them a portion of each of your paycheques until the debt is paid off).

While this all sounds very scary, it can usually be avoided by speaking with one of our credit counsellors. They can go over your situation with you and help you put together a plan to deal with your debt and creditors in a way that will work for everyone. This may involve entering a debt relief program of some sort and having a professional negotiate with your creditors on your behalf, or you may be able to do this yourself once you’re armed with the right information and know how to proceed. You can speak with one of our credit counsellors for free and get their input on your options and the ways you can move forward.

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