Despite our best efforts, financial setbacks happen. A job loss, piling medical bills, or a natural calamity can all affect our ability to meet our credit card bills and loan repayments. Unfortunately, even situations beyond your control can negatively affect your credit score.
Fortunately, some banks offer a reprieve in the form of hardship for credit card debt or loans. These programs give you some breathing room if you’re struggling, so you can use your income to catch up with your debt.
In this article, we’ll talk about the credit card or loan hardship program, and how you can qualify.
What is Credit Card Hardship? Understanding the Basics
A credit card hardship program is a special payment plan that you negotiate with your credit card company during times of financial distress.
The bank may agree to delay payment, waive penalties, or freeze interest over a set time period. In return, the cardholder promises to continue to make monthly payments on their credit card balance. Reduction/hardship plan providers aim to prevent the person from defaulting. If this happens, the bank or loan company risks not getting paid at all.
Hardship programs are not limited to just credit card debt. Virtually all loan companies, like those that offer mortgages or student loans, might have temporary payment plans for struggling clients. Sometimes, these plans are provided under different names, like assistance programs or aid packages.
When shopping around for a new credit card, checking out credit card hardship program reviews can be worthwhile. Even if your finances are healthy, you never know when you might need these services in the future.
Where to Find Credit Card Hardship Programs and Why They’re Important
Most major banks and credit card providers offer hardship programs. However, you won’t find them advertising it. Very few openly discuss the specifics of their programs.
If you’re struggling financially, finding a program can be tricky. In order to be proactive, contact your credit card company as soon as you face any financial hardship. Credit card settlement departments often have reps that will listen to your situation and help you find the best options.
During financial setbacks, people often leave their card issuers out of the loop and might even avoid them entirely. Unfortunately, you’re doing yourself a disservice. If you wait too long, you might severely limit the solutions that credit card companies can offer you.
How to Qualify for Hardship Relief Programs
Most banks offer hardship programs on a case-by-case basis, and they don’t guarantee approval. They might want to see that your financial struggles are due to a sudden, unexpected change in your life situation, rather than from neglect or poor financial decisions.
Some of the events that can qualify you for credit card hardship programs include:
- Workplace or a vehicular accident, especially if you’re the victim
- Emergency expenses, such as medical bills
- Reduced income due to a job loss or company retrenchment
- Natural disasters, like storms or hurricanes
- Death in the family
- Divorce
Preparing to talk with your credit card company about the hardship program can be difficult or even awkward. When talking to them, it helps to have your financial or budget statements on hand to know exactly what kind of help you need.
To increase your chances for approval, we recommend writing a hardship letter. This letter is your opportunity to explain your situation to the bank, including why you’re struggling and what you plan to do to recover. Include as much detail as possible, even dollar figures. Make sure the bank sees that a hardship program is your last chance to avoid defaulting on your loans.
Credit Card Hardship Program Drawbacks
Credit card hardship programs aren’t perfect – they have some drawbacks you need to be aware of.
First, your bank may decide to close your account temporarily as part of the hardship plan. This would raise your credit utilization rate, negatively affecting your credit score. A closed status, even if temporary, can also reflect poorly on your credit report. It can potentially affect your card or loan applications in the future.
The bank might also lower your credit limit as a precaution, affecting your purchasing ability in the future.
Lastly, if you can’t stick to your hardship plan, you might incur more penalties and fees in the future. A hardship plan may be a risky proposition, especially if you cannot cope with your monthly payments at the time you enter into the hardship agreement.
A Hardship Program Helps, But It’s Not a Permanent Solution
The bottom line is that a hardship program is just a temporary pause, not the answer to your financial woes.
You still need a long-term solution to deal with your debt and get back on track. If you need further assistance, our debt relief experts at CreditAssociates are always there for you. Request a free consultation with us today to see what our debt resolution services can do for you.
