| January 10, 2013

Have You Talked to Your Lender About Hardship Programs?

When consumers are drowning in credit card debt and trying to dig themselves out of a hole, the prospect of living debt free can seem unattainable. While paying down thousands of dollars in balances may take time, there is an often overlooked strategy individuals may use to expedite the process and finally get a handle on their bills. Many credit card lenders will allow cash-strapped or struggling borrowers to enroll in hardship programs. While these plans are rarely publicized by credit card issuers, they do exist and they can be effective.

Many hardship programs are designed for borrowers who have fallen behind on payments, but those who are having difficulties making payments – but have not yet missed one – may also qualify, according to Fox News. The programs work by allow borrowers to obtain a lower interest rate in addition to reduced payments, fees and penalties. Options may vary by lender, with some only offering relaxed terms for a few months, and others enrolling borrowers in the restructuring plans until the full amount of the debt is paid off.

Qualifying for a hardship program

Although lenders may make hardship plans readily available to certain borrowers, it’s important to understand that the criteria is strict and qualifying may not be easy. Issuers will explore every aspect of a borrower's finances, including income, expenses and ability to repay the debt, Fox reports. Being ready to offer a sound budgeting plan to issuers may help individuals qualify for the program.

In addition, qualifying for a hardship program will not erase the damage done to a person’s credit who has fallen behind on payments. Contacting lenders prior to missing a payment is a wise idea and may influence their decision to allow enrollment. If individuals meet the criteria and are accepted into a hardship program, it’s equally important to understand that they will likely lose the use of their credit card during the repayment process. This is to ensure that consumers are serious about paying off debt and do not incur higher balances.

Individuals who are struggling to make payments, but do not qualify for a hardship program should not despair. There are other options they can also consider to help them repay what they owe. For example, debt management or debt consolidation programs are another effective way to eliminate balances. Many people who are unable to make a considerable dent in their balances may also find that strict budgeting can go a long way. Prior to making big decisions about how to repay lenders, consumers should speak with a credit counselor to help them assess their standing.

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