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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. Typically used by collectors as a final warning before legal action, this video tutorial reviews key aspects of payment demand letters and provides access to a free official template. Sending a demand letter is significant as it alerts the debtor to potential legal consequences, documents the reason for the payment demand, specifies the exact amount owed, and provides written evidence in case of disputes. It can also be used to propose a reduced settlement as an incentive for payment. The demand letter must adhere to legal guidelines.