(STL.News) If you are having trouble making the monthly payments on your credit cards or feel overwhelmed by the amount that you owe, you might be wondering what your options are. One approach you might consider is a credit card hardship plan. This type of debt relief program is also sometimes called forbearance.
What is a Hardship Plan?
A credit card hardship plan is an agreement between you and the credit card issuer to rework the terms of your payment agreement when you find yourself needing help with your debt.
These have become more commonplace as more people are struggling lately to meet the original conditions to which they agreed when they accepted credit cards. These plans can help lower your monthly payments and interest rates. They can even suspend your payments for a while to help you get your finances in order.
Hardship Plan Benefits
One of the biggest pros of a credit card hardship plan is your interest rate can be decreased. Over time, this can save you thousands of dollars, but in the short term, it will lower your monthly payments. It won’t do away with the interest completely, but even with a one or two percent drop in the rate, you will save money, and your payments will be more affordable.
Another pro is your credit score probably won’t be affected by a credit card hardship plan. You’ll make monthly payments to the company based upon your renegotiated deal, so there won’t be any late payments on your credit report.
You also will not accrue any fees for late payments. Late fees can add up over time, sometimes even putting you over your credit limit. They can make your monthly payment much higher than before, and if you are already struggling to pay it, these fees can make it even harder. Credit card hardship plans can put an end to those fees, as long as you make the new monthly payment on time.
Your monthly payment is lowered is a huge pro for credit card hardship plans. Credit card companies will sometimes agree to as many as six months of lowered payments. The money you save can be put toward other debt, helping you to pay off your bills much quicker.
You can learn more about this at FreedomDebtRelief.com.
Hardship Plan Detriments
Credit card hardship plans may seem like the perfect way to help your financial situation, but there are some drawbacks to consider. Some companies make it hard to find out about these programs, and you may not be able to take advantage of them if you aren’t already behind.
Even though the credit card company may lower your interest rate, your account will still accrue interest, just at the lower rate. This could make it harder to pay back what you owe when you start making full payments again as your balance will be higher.
Credit card companies can also choose to lower your credit limit while you are in the credit card hardship plan. This is not always a bad thing, but if you need your card in an emergency situation, you might not have the funds available. Check with your card issuer to find out if they lower your credit limit when you are on a credit card hardship plan.
If working with your credit card companies feels overwhelming, or you can’t reach an agreement, another good option is to check out debt relief programs. Freedom Debt Relief can help you gain control over your finances and make your debt more manageable. They offer free, no-risk consultations and have resolved over $10 billion in debt since 2002.