Credit Card Hardship Program: Little Known Debt Relief Alternative

Credit Card Hardship Program: Little Known Debt Relief Alternative
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If bearing the burden of making monthly credit card payments is taking a toll on you, then there is a helpful program that is rarely discussed. You must have approached your friends and family members seeking a solution or you have even explored your options online as well, but all in vain. There is one program that can be a solution for this issue by the name of credit card hardship program. This hardship plan can be availed by those lenders who are experiencing . The benefits can include structured payment plan schedules, lowered interest rates, decreased minimum payments and reduced fees. Here, I will discuss as for how this hardship program can be put into maximum effect.

What is a Credit Card Hardship Program or Credit Card Debt Relief Program ?

Credit Card Hardship Program should not be confused with any of the various well known debt management plans offered through non-profit credit counseling agencies. Credit card issuers themselves offer these hardship programs internally. A Credit Card Hardship Program may include the ability to lower the interest rate, lower the minimum payment or reduce fees and penalties. These can be short-term, lasting six months to a year, or permanent, until the card balance is totally paid off.

What it entails to apply for a Hardship Program?

There’s usually a phone number mentioned on the credit statement. It may not be clearly discernible, but you could get a hint from lines such as ‘if you anticipate problems paying your balance, call this number.’ The same number could take you directly to the hardship department or probably, a  customer service department that screens your call. The customer service agent might try to dissuade you by saying that they don’t have a hardship program. That doesn’t mean the end of the world. Try calling back at another time.  Hardship departments go by a variety of names, so if you call any service support number, your aim should be to reach the agent who has the leverage to offer a hardship program.

You want to be clear-cut in your conversation, and let them know that you’re having difficulty and would like to talk to someone about customer assistance. You may want to keep the information relating to your income and expenses handy. Let them know how much you can afford at best. The service agent at this point might brief you about several relief-programs they have in place, but if they don’t fit your criteria, keep negotiating.

Some card issuers are hesitant to consider you for hardship if you’re current on your bills, while other may offer better deals even if you’re current.

Credit Card Debt Settlement Process

Consequences

The Credit Card Act of 2009 limits the circumstances under which a card issuer can raise your APR, but it doesn’t totally prevent them from doing so.

Issuers just don’t cut your credit limits because you’re asking them about the hardship programs. That practice would discourage people from calling them. It’s best, at first, to use caution – merely inquire! Doing that won’t trigger an action, but if you go a step further and indicate in any way that you might be having difficulty paying your debt, which is very likely to happen in such conversations, you would risk losing the ability to use your accounts.

However, if you do apply for a hardship program, your charging privileges are suspended temporarily or permanently. Your card may also be reinstated with a different credit limit after you opt for a hardship program. An important question you must ask : What will happen to my credit card if I successfully complete the program?

Another point of principal importance is how the hardship program impacts your credit score. “As with anything FICO-score related, it depends on how it appears on the credit report,” says Barry Paperno, consumer operations manager for FICO. So try to determine how the issuer will report your agreement to the credit bureaus. Some agents may be able to give you this information, while others might be completely oblivious to such information.

Verdict!

So should you go for the hardship program? Well if you feel it’s the only viable option for getting out of credit card debt and you’re prepared to risk the reputation of your credit score, then definitely you have to consider it and discuss the details with your credit card issuer.

That’s pretty much all about the Credit Card Hardship Programs. Now we’ll be looking at some of the other beneficial tips to help you pay off your debts in an effective way.

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Hardship Letter for Credit Card Debts

Writing a hardship letter allows you to detail the circumstances that led to your current financial situation and ask for assistance in handling your outstanding balance. Taking a humble and honest approach can encourage credit card companies to go easier on you with their collection efforts.

What is the purpose of this letter?

The purpose of the letter is to describe, in the homeowner’s own words, why the homeowner is not or may not be able to make his or her mortgage payments. A key thing to remember is that it is important that you include actual reasons for the hardship and any plans you have for the future. Before writing this type of letter, figure out what can be paid each month. Be sure to be honest; don’t make promises that cannot be kept. If there is no money at all to pay the debt, then bankruptcy may be the only option. This letter is for people who have some money to pay, or who have fallen behind and need help catching up.

Tips for writing a credit card hardship letter requesting a debt settlement:

–    Explain the reasons for your hardship clearly and concisely. Include any  supporting documentation that you have (e.g., copy of your unemployment  awards letter)
–    Be professional and polite
–    Your opening offer should be about 20 percent of the debt amount
–    Be confident and persistent. Be specific about the remedy you are seeking, and don’t promise to send more money than you can reasonably afford. 
–    Don’t show hesitation or get angry
–    Send the letter via certified mail to the creditor’s address for billing inquiries and  concerns, and keep a copy for your records.
–    Try to negotiate lower interest rates

SAMPLES OF CREDIT CARD HARDSHIP LETTER- View Online

While a hardship letter will not magically get you out of debt, it is a great tool to use to begin the process.

Also Read: Credit Card Debt Relief Program

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Getting enrolled in a hardship program

Before you think about enrolling yourself in this program, make sure you are aware of few things, let us discuss them in detail –

  • When you call your creditor, ensure that you have a word with someone who has holistic knowledge about the credit card hardship program. Your credit card might be having a number, on calling that number you can have complete information about this program. In the absence of this number, you can use the credit card company official number. If you get connected with someone in the hardship department, ensure that you can get your queries answered.
  • While you are talking to someone at the hardship department, make sure you don’t share all the details with him/her. This will be your first call, so don’t expect a permanent solution. It is advisable that you make yourself familiar with the specifics of the plan, including what arrangements should be made for the borrowers. Start sharing the specifics of your situation only when you feel comfortable.

Make sure you are aware of the fact that the creditors might initiate some modifications to account on the basis of your conversation. It is also important you have not promised what you can’t pay.

  • If you want to get on with the hardship program, ensure that you shared every single detail about your situation. Avoid taking instant decisions, first, you need to inquire every minute detail about the program and then deciding how it’s going to fit your budget and then making a final decision. Once you feel confident about the hardship option, make sure to be particular and firm. Don’t be shy in projecting an amount that you can easily afford. You will certainly make the creditor feel interested in working with you on this, while others might be not so willing to negotiate.
  • While you are inquiring about the credit card hardship program, make sure you have inquired about the credit reporting. In the case, you are on the fence, then this could be a decisive element. You should also know what type of documentation will be forwarded to the credit bureaus. You should be aware of the fact that the creditor might ask you to close your account when you have given your approval for this program. While it may affect your credit score, but it will have a mild impact if the account has been reported as closed by consumer. Make sure you have a word with the representative and instead of getting the account closed by the creditor, it should be, ideally, closed by the consumer.

Setting up Credit Card Hardship Program

Related Post : Credit Card Debt Consolidation For Bad Credit

#Get ready

– When you are planning a hardship program, make sure you have done some important preparations. You don’t have to make the preparations for the war but instead preparing few lists would do. Here is the list you need to prepare –

First and foremost, prepare a list in which you will have to mention the amount you are drawing via your salary, side work income, income from rental property or any source of generating income.

The second list will comprise of any credit card debt or any other debt that you might be having. The list should also include the customer support numbers, issuing lender, interest rates, and the account numbers. Make sure you have made the list mentioning the higher interest rate to the lowest ones.

The third list will comprise of all the expenses and I mean all of them. I am talking about the expenses such as – secured loans like boat loans, auto, and motorcycle, home insurance, mortgage, car insurance, day care costs, gas, food, and anything else that you make a payment for on a monthly basis.

Also Read: Unsecured Credit Cards : The Best Credit Cards for Bad Or Average Credit

#Starting off with the highest interest rate

– So, you have to begin with the credit cards having the highest interest rate, make sure you have taken the assistance of the customer support in this. The moment you get connected with the executive, you can tell that you currently you are going through hard financial times and inquire them if they offer any financial hardship program. In most of the cases, you will get a yes from them.

On the basis of the information, that you gathered, reply to all the questions asked to you by the executive. If the financial situation is genuinely worse, you will surely receive lower interest rate and a tailored payment plan that will help you get out of the debt.

Related Post : Credit Cards: Everything You Need To Know Before Applying [INFOGRAPHIC]

#Rinse And Repeat

– If you are having multiple credit cards and you are genuinely going through financial hardships, don’t stop with one credit card. Don’t waste your time and contact all your lenders immediately, make your moves according to the instructions . You will be surely surprised to see how much the lenders are willing to lend a helping hand.

Things to consider before applying for a hardship program

– You should know, before applying for a credit card hardship program, that this program may have a negative effect on your credit. The hard fact is that your credit score is established on your available credit. As the available credit goes down, so does the credit score. On the other hand, if you have already spent 70% of your credit limit, chances are that you have already harmed your credit and the effects will not be that hard to recover from.

Hardship programs are not for everyone – All those who are going through a financial hardship, they have a unique situation. While deciding a hardship program, there are so many elements that are worth considering, such as – the reasons owing to which they have landed in such a position, ability and inability to pay off their debts, the attitude towards the whole issue, etc. I would say that you should first consult a debt professional before you make up your mind.

Make timely payments – When you sign up for a credit card hardship program, the lender has shown a keen interest in helping you out, as you have also expressed a need and a desire to pay back the loan. However, if you are missing your payments regularly, a negative message is being sent to the lenders showing your insincerity about the debts and eventually you will lose the program. In some cases, you will not be allowed to re-apply.

Related Post : Credit Card Debt Consolidation

Credit Card Debt Relief Programs – Debt Relief Options for Settling Credit Card Debt

If you being haunted by the debt, I am sure you have not left any stone upturned to look for a permanent solution. In a hurry, the majority of the people try debt settlement thinking that they will get deliverance from their fiscal burden. But, the fact is that it’s not that simple. Debt settlement doesn’t come without risks and consequences.

What is a debt relief program?

These programs play a vital role in paying back the lenders and the creditors, this also plays an important role in saving your hard-earned money simultaneously. There are debt relief companies mainly offer these debt relief programs in exchange for some fixed amount.

Who Are Benefited by Debt Relief Programs?

Debt Relief Programs are also designed for all those people who seek particular reliefs. Let us get to know more about this –

  • All those people seeking payday loan debt relief
    Payday loan debt settlement.
    Payday loan debt consolidation.
  • All those people seeking credit card debt relief options
    Credit card debt settlement.
    Credit card debt consolidation.
    All those people looking for Christian debt relief options
    Christian debt settlement.
    Christian debt consolidation.
  • All those people seeking medical debt relief programs
    Medical debt settlement.
    Medical debt consolidation.
  • All those people seeking free debt relief programs
    Non-Profit debt settlement.
    Non-profit debt consolidation.
  • All those people seeking IRS tax debt relief options
    Installment Agreement, Penalty Relief.
    Offer in Compromise.

Which are the main debt relief programs?

Debt Settlement

– This program is also known as debt reduction or debt elimination. As per this program, there is an involvement of both you and the company you have hired for debt settlement with the creditors. The key motive is to reduce the principal, owned by you, while also getting rid of the debt.

Related – Unsecured Credit Cards : The Best Credit Cards for Bad Or Average Credit

Advantages of  Debt Settlement

Debt settlement companies have all the expertise and experience that comes helpful while negotiating with the creditors.

You won’t find any unseen surprise or nothing will appear on its own when you try to settle your debts on your own.

Disadvantages of  Debt Settlement

Every debt settlement company has its own way of functioning. You have to do a research work, at your end, to find a good and professional company.

If you have taken the services of Debt Settlement Company then it can prove to be a costly affair. Often they will charge you some percentage of the debt that you are looking to be settled.

Credit Card Debt Consolidation

Credit Card Debt Consolidation

– It means taking a loan for the consolidation and paying off other debts. The key motive behind debt consolidation is reducing the interest rates and combining all your debts in one single monthly payment.

Advantages of Debt Consolidation

Debt consolidation companies have years of experience and they will go that extra mile to find the lowest monthly payment and this is done via negotiating with the lenders.

One thing that you should look for in a leading debt consolidation company is the experience. When I say experience, a good company should have years of experience in negotiating with the lenders.

Our calculators – Credit Card Interest Rate Calculator   |    Credit Card Payoff Calculator

Disadvantages of Debt Consolidation

Though, initially, you have a low-interest rate, there are more probabilities that it will take a longer period to payback your debt. In turn, the amount you will be paying in interest will be much higher.

Debt consolidation will not prove a permanent solution for your debt problem. No matter what is the reason, it is imperative you have made significant changes in your behavior that led you to the debt.

Debt Management Plan

Debt Management

– It can prove handy in handling varied unsecured debts like – medical bills, department store cards, credit card bills, and student loans. The main aim behind DMP (debt management plan) is to cut back the monthly payments by getting a relief from the interest rates, penalties, and late fees.

Advantages –

A debt management plan will play a major role in keeping your payments on track and eventually assist in improving your credit score.

With debt management plan, it is much easier to look after your debt than sorting out on your own.

Debt management plan will also help you to figure out your expenses, making it convenient to frame and maintain a monthly budget.

Disadvantages –

On the negative side, you have to pay an enrollment and maintenance fee.

Related –  Credit Card Hardship Program    |     Secured Debts vs Unsecured Debts

Credit Counseling

– Credit counseling is also one of the key programs. In this credit card debt relief program , you work with a credit counseling company and they review all your budgets and also help you evaluate available debt relief options.

Credit Counseling

Advantages –

Some of the credit counseling companies are nonprofit in nature and provide counseling services without charging anything from you. On the other hand, there are some organizations which for-profit in nature and such companies have some fees.

Some of the reputed credit counseling companies have employed experienced and knowledgeable counselors. They are the ones who make you equipped with the right knowledge and helpful tips to manage your debt efficiently.

Related –   Credit Card Debt Consolidation For Bad Credit

Bankruptcy

Bankruptcy

– If you are in a critical situation, there are two credit card debt relief government programs, either filing a Chapter 7 bankruptcy will eliminate all your debts or a Chapter 13 bankruptcy which establishes a year-long repayment plan. The main aim behind the bankruptcy is to offer you a new start from your debts.

Advantages –

Even you have filed for bankruptcy yourself, the creditors, with the help of the law, still can get in touch with you. If the creditors get to know that you hired an attorney, then they will contact him/her without letting you know.

Before you actually file for bankruptcy, it is important that you have links with the court officials and trustees. They are the ones who will review your case and the creditors as well.

If you are thinking of filing a bankruptcy petition then there are high probabilities of making a mistake, this will also influence the decision and it can also jeopardize your future as well. So, it is advisable that let a professional handle all these legal formalities.

Disadvantages –

If you have hired a bankruptcy attorney, you will have to pay him/her as well. You are already in debt and the attorney fees are quite high.

Asking for attorney referrals from your near and dear ones can be an arduous situation.

You don’t have to worry about the attorney fees, but in addition there are paralegal fees, consumer counseling charges, court filing fees, etc.

Legislations to help with credit card debt –

The government has approved legislations that will help you to deal with credit card easily. This legislation comprises of three important components which manage the credit card companies and also offer protection to the cardholders:

Earlier Bill Notices – The credit companies are required to inform the cardholders about the modifications in the contract 45 days prior to initiating a change. As per this legislation, you, as a cardholder, will have a protection with the constant changes that the credit companies make without letting you know in advance. The best part is that you also reserve the right to reject any changes, made in the contract, by the credit card company. Be informed that if you have refused the change, then you have five years to pay off your debt.

Restricted Interest Rates – Unless, you have not made a single payment within a 60-day time period, then the credit card company does not have any right of increasing the interest rate on your credit balance. As per this legislation, you are being offered the protection from seeing a sudden increase in the interest rate while you are struggling to make the consistent payments.

Greater Notification to Consumers – As per this legislation, the credit card companies have to send a statement to you three weeks prior to the due payment. This time period of three weeks is being decided to offer an advance notification to you about the impending payment. This time period also lets an improvement over the prior previous laws as per which the card companies only had to send mail statements two weeks before they were due, it also aims prevention against the late payments also.

What are the do’s and dont’s of the debt relief programs –

Don’t be sluggish – Generally, it has been witnessed that the people are unaware of what they should do when the payments are behind for more than six months and unfortunately by now their account has already been charged off. Are you wondering what charged off means, this means that the prospects of getting repaid are quite low. Be informed that it does not mean that you don’t owe the debt now.

If you are thinking of having a word with your creditor, then don’t play the waiting game and do so right away. Until the time you have not received deliverance from your debt, there are some creditors who might recommend you debt settlement. Experts are of the view that if you act quickly, you might be able to use different options like debt management plan that will prove handy in paying your debt in full and save your credit score.

Don’t neglect the aftermaths – If you have hired a debt relief company, make sure they have informed you that the debt settlement can also hit your credit score. In addition, you also won’t be able to borrow money at a low-cost interest rate.

Showing all your financial documents – The creditors, before settling your account, will ask various documents including – your income, existing debts, and your assets, etc. They will ensure that the person (you) who is being offered the settlement will be able to pay the debt in full or is it just a method to save money.

Avoid making a promise you can’t keep – If your creditor has allowed you to pay the debt over time, make sure you have set the payments in such a manner that you are able to manage them easily. Try to set a settlement plan that is practical enough and this is only possible when you have personally negotiated with your lender.

Solve the matter – If you are making the payment for the debt settlement, ensure that it also reflects on your credit report. There are some creditors who don’t even bother to inform the three key credit bureaus, even though it is mandatory.

How debt relief companies work?

If you have decided to take the services of a debt relief company, the company will negotiate on your behalf with your lender. They have already dealt with thousands of such cases and rest assured that they will be negotiating a much lower amount that will be much easier for you to pay. In turn, you have to pay the company a set monthly amount and they will further pay your creditors while keeping their fee.

Stop having communication with your lender, this will be the first thing that the company would ask you to do. This helps in making your lenders so desperate that they would even go ahead and accept a settlement deal.

What are the advantages of working with a debt relief company?

Seeing more and more people drowned in credit card debt, the debt management industry is booming like anything. Let us discuss some of the pros and cons of hiring a debt relief company

Interest rates will also reduce – As and when your debt relief company gets in touch with the creditor, there are strong probabilities that your interest rate will come down by several points. If you are paying 17%, then it can come handy mainly if you are paying an APR of 20% or more. If your APR gets reduced, you can easily save thousands of dollars.

Waiving of the fees – Your company can also make your creditor cancel any late fee that might have occurred. This will help you to save $40 every single month.

One monthly payment – Probably one of the key benefits of a debt relief program is the consolidation of the debt payments in one single monthly payment.

Getting rid of debt – On enrolling with a debt relief plan, your debt management plan will be paying all your creditors on a monthly basis, and you don’t have to worry about your debt anymore.

What to look for in a debt relief company?

First and foremost, it is imperative that you have done some research work. List all the companies offering debt relief services along with their reputation. If you have finalized a company, make sure the company follows religiously the rules set by FTC. If you feel that the company is not disclosing or not sharing all the legal formalities, which is mandatory as per the law, with you then change the company without any second thought.

Your choice should be the company that can help you reduce your debt and at the same time charge you the least. Some companies charge on the basis of the debt amount while others charge some percentage of the debt that the company will settle for you.

It is imperative you have checked the company’s accreditation well in advance. There are certain laws, for such companies, that they need to follow. There are three accreditation that these companies need to follow –

Finally, you should also consider the education and awareness a company is willing to offer. A good company will also guide you how the finances should be managed effectively.

So, if you want to see yourself out of the debt, then make sure you have considered the above-discussed information.

Credit Card Debt can be a serious headache for anyone, and if you’re experiencing the same, then we encourage you to go through this article.

 

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