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A demand letter for payment serves as a formal notice to a debtor, requesting payment for an owed amount by a specific date. Typically used by collectors, it acts as a final warning, indicating that legal action may follow if the payment is not made. This video tutorial discusses the significance of demand letters, highlighting that they inform debtors of the amount owed, request timely payment, document the reason for the demand, and provide written evidence for potential legal disputes. Additionally, it mentions that a demand letter can be used to propose a reduced settlement as an incentive. The video will also provide information on obtaining a free and official template for creating a demand letter.