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A demand letter for payment is a notice requesting payment from a debtor for an amount owed, with a specific due date. It serves as a final warning before legal action. Sending a formal demand letter is beneficial as it alerts the debtor, records the reason and amount owed, sets a due date, provides written evidence for legal disputes, and can be used to offer a reduced settlement. It is essential for collectors to use an official template and follow legal guidelines when sending demand letters.