If you're struggling to make payments on your bills, you may not know that you have options – including what's typically called a hardship repayment program. These are programs that banks may offer directly to you, their account holder, if you express how unaffordable payments have become (vocally with a phone call, or behaviorally by missing payments).
These repayment plans are typically something you see with credit card bills. And the benefits from them are primarily related to your interest rate being lowered temporarily — or for the life of the balance as long as your payments are made on time.
I've watched this process evolve over the years. At the onset of the recent recession, many banks, which had never really made wholesale efforts to offer their struggling cardholders these lower payment options, quickly began to warm to the concept. Prior to this period, lenders would more often encourage you to talk to a nonprofit agency about consolidating your credit cards in order to achieve the same benefit – more affordable monthly credit card bills.
At the height of the economic downturn, many banks saw record-setting default rates on credit cards. In order to help minimize losses on credit cards, it is no surprise that banks would make direct lower monthly payment plans available to their cardholders. But in many instances, these same account holders would not be able to qualify for a similar lower monthly consolidated payment through a counseling agency. This is often because the bank is primarily concerned with payments they received from you, not whether your other creditors get paid. And credit counseling agencies must concern themselves with your whole debt and income picture. A credit counselor taking a deeper dive into your finances is more likely to determine whether you can afford your bills, or when you should compare alternatives to credit counseling.
Why is this worth pointing out?
Credit card default rates have stabilized. And while a couple of the largest credit card banks still extend great rate reductions, others no longer provide the same lower monthly payment options, or may not extend the reduced payment plan availability beyond several months to a year's time. (You can use this calculator to see how long it will take to pay off your credit card.)
Negotiating Lower Payments
If you need to get more than even one credit card lender to agree to a monthly payment reduction, this type of trend change can impact you in the following ways:
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You may have creditors who will limit the monthly payment reduction to a few months, or for a shorter time frame than your fluid budget situation calls for.
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One or more of your creditors may not extend interest rate concessions to you more than once. This is problematic when your financial situation remains unstable for longer than you anticipated, and can be compounded across multiple accounts.
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You can often find no traction enrolling in a hardship repayment plan unless you miss payments, and sometimes must fall behind enough for that to cause late payments on your credit reports.
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Some of your creditors may not offer you a hardship payment program at all, but would reduce your payments if you were working with a nonprofit credit counseling company.