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A demand letter for payment is a formal notice requesting a debtor to pay an owed amount by a specified date. It serves as a final warning before potential legal action and is commonly used by collectors. In this video, essential information on payment demand letters is reviewed, along with resources for obtaining a free official template. The importance of sending a demand letter lies in its ability to alert the debtor of possible legal consequences, document the reason for payment demand, specify the amount owed, and provide written evidence for any future legal disputes. Additionally, it can offer reduced settlements as an incentive for prompt payment. The demand letter should adhere to specific guidelines.