Little Known Credit Card Programs You Should Be Aware Of

Little Known Credit Card Programs You Should Be Aware Of

Are you feeling overwhelmed and frightened about your debts?

These feelings and fears of going bankrupt arise when you find yourself in a debt spiral after running out of money you saved to pay back your financial obligations.

There is a light at the end of the tunnel, and this is a hardship program which can get you out of the debt spiral. This type of credit card program is a well-kept secret hidden by many financial institutions.

A hardship program, generally known as a credit card repayment plan, is a solution that has the possibility to save you a lot of money in interest, reduce the financial burden and ultimately get you out of your financial troubles.

Let us take a look at what this hardship plan is and the way it impacts your credit positively.

What Is A Hardship Program?

A hardship or credit card program is completely different from the particular debt management programs you see advertised in the media.

A hardship plan doesn't have any mass payment or intermediary loan companies. It facilitates you to work directly with the credit card company and take part in its unique repayment plan. Many lenders do provide hardship programs, though you’ll rarely find them publicized.

“Each creditor’s plan is a bit different,” said Thomas Nitzsche, credit educator at Clearpoint, a consumer credit counselling firm. He says that programs usually offer the following benefits:

  • A lower monthly interest
  • A smaller payment
  • Lower penalties and fees
  • A fixed payment plan

If you are facing a short-term financial bad patch - a medical emergency loss, serious car crash or job loss, then the advice of Nitzsche can certainly help you a bit, he says that telling the creditor your story may convince him (the company) to offer you the money-saving benefits of a repayment schedule.

How Can You Improve Your Credit?

Right after signing up for a hardship program, you will see a disconcerting drop in your credit rating. This usually isn’t everlasting, though it will take some months of on-time repayments and responsible behavior to get your credit score back to exactly where you want it.

If you productively complete the program, that initial drop will convert into a substantial credit score increase.

Here’s the reason why:

If you are going to sign up for a hardship plan, you might have already missed a few payments on your credit cards. Payment record is the No. 1 element in managing your FICO scores, making up 40 % of the credit score. So, you might have already noticed that your credit ratings dropped after missing payments.

Your loan provider, who reported those overdue payments to the credit reporting agencies, will now acknowledge your regular, on-time payments - which will mean great news for your credit score.

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