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A demand letter for payment is a notice requesting payment from a debtor by a specific date, serving as a final warning before legal action. Sending a formal demand letter is important as it alerts the debtor of potential legal consequences, documents the reason for the payment demand, specifies the amount owed, sets a due date, and provides a written record for legal disputes. Additionally, it can be used to offer a reduced settlement. Creating a demand letter should follow certain guidelines to ensure effectiveness.