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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 important as it notifies the debtor, records the reason for the payment, informs of the amount owed and due date, creates a written record in case of disputes or court evidence, and can be used to offer a reduced settlement. Follow guidelines for drafting a demand letter.