Glossary · legal

Demand letter

Also called notice of default, acceleration notice, demand for payment.

A written notice from a creditor or its counsel stating the default, the amount claimed, and a deadline, usually sent shortly before suit.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

A demand letter typically recites the agreement, identifies the default, declares the balance accelerated, states a figure, sets a payment deadline, and reserves all rights. Where the contract makes notice a condition of exercising remedies, the letter is also a procedural step the creditor has to take before it can act.

The figure in it is a claim. It generally includes the full uncollected amount, default and NSF fees, and either actual attorney fees or a contractual percentage. On an advance it will include the entire unearned fee, because acceleration makes the whole purchased amount due.

A letter from outside counsel usually means a file has been placed for collection, which changes who has authority to settle and adds the firm's fee to whatever gets negotiated.

Where this one catches people

The number in the letter is an opening position, not a balance, and it is the moment when negotiating leverage is highest. It collapses once suit is filed and disappears once judgment is entered. Businesses that ignore the letter, then ignore the summons that follows, arrive at the negotiation with nothing left to trade.

Read next

Acceleration clauseThe clause that makes everything still owed due immediately on default, rather than on the original schedule. Attorneys' fees clauseThe term making the business pay the funder's legal and collection costs on default, often as a fixed percent… DefaultThe condition of having broken an agreement, by missing payments or by breaching any other promise in it, whi… ForbearanceA written agreement in which a creditor holds off on its remedies for a defined period while the borrower per… SettlementAn agreement to resolve a defaulted balance for less than the amount claimed, or on a restructured payment sc…

Demand letter — common questions

What does demand letter mean?

A written notice from a creditor or its counsel stating the default, the amount claimed, and a deadline, usually sent shortly before suit.

Where does demand letter catch people out?

The number in the letter is an opening position, not a balance, and it is the moment when negotiating leverage is highest. It collapses once suit is filed and disappears once judgment is entered. Businesses that ignore the letter, then ignore the summons that follows, arrive at the negotiation with nothing left to trade.

Is demand letter the same as an interest rate?

Demand letter is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does demand letter apply to?

It is not specific to one product — it appears across the market.

Is there a worked example of demand letter?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside demand letter?

Acceleration clause, Attorneys' fees clause, Default, Forbearance, Settlement.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.