Is it Bad to Negotiate Hardship Terms With Credit Card Companies?
- Credit card companies typically offer hardship programs only to debtors they believe are acting in good faith, but are, for reasons beyond their control, unable to pay back the debt under the terms outlined in their contract. Under a hardship program, a debtor will often be given a reduction in the amount of money owed, provided a lower rate of interest, or allowed to pay back the debt over a longer time, in payments of a smaller size.
- Although negotiating hardship terms may potentially save an individual from going even deeper into debt, the credit card company may demand some concessions in return for offering new terms. For example, a credit card company may demand that the individual agree to a lower credit limit. Or, in some cases, the company will choose to close the individual's account entirely. Also, if an individual signs up for a hardship program and then misses a payment, he may be severely penalized.
- The other downside to signing up for hardship terms is that a cardholder's credit score may take a hit. Typically, having the terms of a loan changed will be noted on a person's credit report. If some of the debt is written off, this will lower the person's credit score. This decrease in credit score may prevent an individual from receiving credit on reasonable terms from other lenders.
- Although accepting hardship terms may lower a person's credit score, it is likely that his credit score was declining or in imminent danger of doing so before he accepted the terms. Few people who are not at danger of defaulting on a loan will be offered hardship terms. So, receiving hardship terms can be seen as a means of putting a tourniquet on an individual's debt.
