[Text: Credit Counseling vs Hardship Repayment Plan]
Hi there. Michael Bovee with Consumer Recovery
Network.com and I am back to talk more about credit counseling and the hardship
repayment plans. In fact, what is the difference between
a hardship repayment plan and credit counseling? They are very similar actually.
One of them is an opportunity to get the lower payments, monthly payments right in
front of your creditor or hardship repayment plan.
Any other who is working with professional it go and get those things accomplished
for you. There are good things and bad things to
consider about the hardship repayment plan. When you are working with a creditor most
of the larger national banks, CitiBank, Bank of America, Chase, Wells Fargo,
[inaudible 00:00:51], Discover, Capital One.
These larger issuers typically having answered the economic downturn and people
falling behind their credit card payments by setting up the offers that they will
make to you as you fall behind and here is the key point by the way,
let's stop here.
Hardship Repayment plans are offered to people who are late in payments.
If you call the World Bank and are saying, "Hey I am not going to be able to
make my payment next week when it is due, what do you got for me."
What you have just done is signal that you are somebody who is now a high risk so
whatever balance you have, I mean look, they will respond to your request number one with
a ‘no' because you have not missed payment yet, there is no reason until you give them
a reason for them to offer you anything nicer than what you are paying.
So they may respond to you: 1. with a no. 2. By closing your account.
3. By reducing your available limit to what you owe and consistently doing that as you
continue to make payments and you may have never even missed one.
Okay you had made that payment a week later and turn your situation around
and kept those payments up, but that one call could really screw you so be aware that
hardship prepayment plans will require you to be late.
Sometime as much as even a month or two late before that specific creditor may
offer you a reduced interest plan where they will re-aid your account.
They will bring a current even though you are not going to make the payment up to
what you have owed and missed over the month or two.
They will re-aid it for you similar to a credit counseling agency that can do the
same thing for you. One of the issues with hardships repayment
plans is the more creditors you have the more of them you got to call.
The less or let's put it this way, the smaller the lender credit unions
store cards gas cards. They may never make a hardship repayment
plan available to you. Hardship repayment plans taken on
different shapes and sizes so if you are working with a large credit issuer they
may have a policy that they will offer you only temporary hardship plans where they
will reduce your interest rate down to even 1.9
Sometimes even 0, but I assume between 0 and 8% or 9% and I brought down for 3
months, 6 months, 12 months and then you know the expectation is it that ones that
time period is over you are back the way you were. That was a temporary hardship and you are
back on your feet.
They won't offer to you again and then there is other national lenders, credit
card lenders, that will take your balance reduce your interest rate.
They will advertise your balance over 60 months or 5 years.
So now you have got a life of the balance hardship plan.
Sometimes you have to renew it very year and they will remind you, sometimes it is just
set up for the full 60 months.
You miss one of these payments on a hardship plan you are back to where you
started and so definitely commit to one of these things in the same way that we
continuously warn people to consider when and why they should enroll in credit
counseling program. Very similar these hardship arrangements
because if you missed a payment you lose the benefits for all that months a time
that you are enrolled in a hardship plan.
You paid x amount of dollars only to no longer be able to maintain that several
months later. You have got several months a time wasted
on a solution that didn't work and seven months of money that may helped you
succeed in settlements or paid for you know entire bankruptcy process.
So be sure when you are engaging a hardship repayment structure with creditor
that you can do on your own that you generally know what your income is going
to be that is dependable and consistent. Now, let's back out to something.
I said that some creditors will not offer these hardship plans.
So for somebody who has maybe just 2 or 3 accounts and with major large banks
national credit card issuers, you are probably okay to attempting work with
those creditors on your own and see what kind of monthly payment arrangement you
can make. If you have multiple creditors say 9,
10, 12 and some of them are the smallest of creditors like I said store cards,
department stores, gift cards, small regional banks and credit unions.
They may have no structure or system or policy for offering you these hardship
plans, however, they do have a history of working directly with credit counseling agencies.
So here is another way to get the same thing to get that lower monthly payment as
opposed to doing it on your own, it might be more complicated or some will not give it
to you and you need that structure where all of them are fitting together into this
nice neat 1 payment credit counseling fits that bill. So if you are interested in speaking with
credit counseling agency most of them are non profit, there are about 300 of them around the nation.
I prefer one in particular for very good reasons, they are a natural firm they are in
Massachusetts and you can reach them online. Just go to Cambridge-Credit.org or you
could pick up the phone and talk to them today and find out from a councilor what
your monthly payments can be reduced to as opposed to calling like creditors yourself
into one phone call, talk to a counselor today and you can hit them at 888-948-4425.
This is Michael Bovee for Consumer Recovery Network.com.
Thanks for tuning in to hardship and a little bit of credit counseling
information, I will see you on the next video.