Thu. Jun 1st, 2023

Financial Hardship Assistance

If you are having difficulty meeting the payments on your mortgage, personal loan, or credit card account, ask your lender if they offer financial hardship assistance. Often these lenders can modify or suspend interest and fees for a set amount of time so as to provide relief from payments that might otherwise become overwhelming.

Recent research demonstrates the correlation between financial hardship and uninsurable health outcomes among working-aged adults, even after accounting for pre-pandemic income levels, and higher risks of anxiety or depressive symptoms, food insufficiency and housing eviction.

Credit card issuers

Credit card issuers offer financial hardship assistance for people having difficulty making their payments, such as deferment, forbearance and long-term payment plans designed to help you recover and avoid falling behind again.

If you are having difficulty paying off debts, finding the appropriate solution is paramount to staying current on bills and staying within budget. Credit card issuers offer one solution which not only allows people to keep current but also increases credit scores while keeping finances under control.

Contacting credit card issuers directly can provide the best insight into their hardship programs; many offer dedicated COVID-19 pages on their websites that explain what options may be available to customers.

Wells Fargo offers several solutions that can help restore financial stability, including payment freezes that reduce minimum monthly payments or even suspend interest and fees temporarily.

Apply for a financial hardship loan – short-term, small-dollar loans available through federal credit unions that are regulated by the National Credit Union Administration (NCUA).

Before applying for a hardship loan, it is crucial that you understand its impact on your credit report and score. You’ll need to demonstrate how the financial crisis has adversely affected your score while outlining a repayment strategy that fits within your means.

Most credit card issuers offer custom plans tailored specifically to you and will typically request the latest pay stubs, bank statements and any other documents necessary to determine eligibility for hardship plans.

Your card issuer may offer a free credit monitoring service as part of its hardship program, helping you keep an eye on your credit and ensure the plan is working for you.

Credit card hardship plans have the potential to damage your credit in several ways. First, they could negatively impact your credit utilization ratio – one of the key determinants of FICO(r) Score – leading to lower scores and making new lines of credit harder to come by. Furthermore, closing accounts as part of hardship plans could further compromise their rating and damage it over time.

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When your bills become out of control, it may be time to speak to your lender about financial hardship assistance. Your lender can offer various solutions such as reducing interest rates or monthly payment amounts as well as working together on creating a repayment plan with you.

Hardship loans provide emergency financing that can cover unexpected expenses like medical bills or emergency home repairs, with low loan limits, interest rates and short repayment terms.

Personal loans provide another form of emergency and general expense financing that are readily available through banks, credit unions and online lenders. They don’t require collateral and come in various sizes.

Before applying for a personal loan, ensure you gather all of the necessary information – this may include your employment status, credit report and income history.

Create and send a letter to your lender explaining your circumstances and seeking financial hardship assistance. Your letter should be no more than one page long and include details regarding what will help get back on track with payments.

Most lenders provide hardship programs that allow you to temporarily reduce payments and/or lower the interest rate on your account. Be sure to inquire as well about their policy for reporting late payments to credit bureaus.

Re-aging your loan to reduce interest rate or make monthly payments more manageable can also be an option, though the process can be time consuming and may take more than one try to discover which option best meets your needs.

SoFi offers an exceptional hardship protection program to assist unemployed borrowers who have fallen behind on their debt and are unemployed; the program allows forbearance and deferral payments in three-month increments up to 12 months and adds past due amounts into regular monthly repayments until you can resume timely repayments.

Many lenders will work with you to reduce payments, but be mindful that this could have an adverse impact on your credit score and ability to qualify for other forms of financing. Make sure your lender explains exactly how this will be reported and whether it affects other forms of finance as a result.

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Financial institutions

If financial hardship is keeping you from making ends meet, it’s important to remember there is help available – from forbearances and repayment plans, to credit card consolidation programs which could help pay off bills and lower monthly payments.

While many financial institutions provide these programs, you should contact each one individually and determine their offerings for helping you. They typically come in the form of installment loans or deferred payment plans.

Some banks offer forbearance programs to temporarily suspend your payments while you work to restore your finances, both individually and commercially. These may help homeowners keep their homes while dealing with their financial woes.

Contact your local credit union as another viable solution. These organizations are non-profit institutions dedicated to encouraging savings and providing low-cost loan services for members.

These organizations may also give you access to credit cards you may be unable to acquire on your own – an ideal way to borrow money for future investments or purchases.

Based on your circumstances, a repayment plan that incorporates past due amounts into monthly payments could be an ideal solution if you’re experiencing immediate financial strain and can afford an increase in payments over a short period.

IF YOU’RE FAILING AT MAKING YOUR PAYMENTS, it may be worthwhile reaching out for some assistance from family or friends in order to avoid incurring expensive debts that will only damage your finances in the long run. If they agree, this could be an effective strategy for staying debt free in the future.

In some countries, multiple agencies oversee financial institutions. Their main responsibility is ensuring they operate safely and in accordance with applicable laws while protecting consumers’ rights and ensuring consumer protection.

Credit counselors

Credit counselors assist their debtor clients in emerging from debt and avoiding bankruptcy. Their responsibilities involve evaluating client income and assets, reviewing debt repayment plans, offering debt relief solutions and creating budgets and other financial planning strategies to aid clients.

Credit counselors typically work for private and nonprofit credit counseling agencies, as well as banks or lenders offering financial hardship assistance for customers with large debt loads or other issues.

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Financial hardship counseling aside, credit counselors also provide money management workshops that show clients how to control spending and budget effectively. Furthermore, they may advise clients how to pay off debt through debt management plans that involve one monthly payment to an agency which then distributes that money among creditors.

When considering credit counseling as a solution for debt relief, look for an agency accredited by the Federal Trade Commission (FTC), as they have the power to sue companies that mislead consumers. Also check with your state attorney general or consumer protection agency whether any complaints have been lodged against any specific company.

Credit counselors typically provide advice to consumers for free; however, fees may be applicable for services like debt management plans. When choosing an agency that focuses on helping consumers get out of debt it is preferable to find one with non-profit status as for-profit agencies may have more incentives to sell products and services rather than help clients escape them.

Credit counselors specialize in negotiating payment plans with creditors that will satisfy both parties and help protect your credit score and home from bankruptcy or foreclosure. This service may save your score and keep bankruptcy or home repossession at bay.

Credit counselors should review both your budget and debts before discussing how best to meet your financial goals.

For high-interest debt, credit counselors may suggest switching your balances over to no-fee cards with an introductory 0% interest period of 12-18 months, which can save money and shorten the time required for repayment. A debt consolidation loan might also provide relief by replacing multiple debts into one loan at lower interest rates.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.