What's Forbearance?

Last week while I was doing research for my Money Wi$e Women Get Smart teleseminar with Emily Peters (Credit.com) on Eliminating Credit Card Debt I discovered the forbearance program. I was unfamiliar with forbearance, but Emily told me it's been around a long time. The program is being utilized more because of our challenging economic times.

Forbearance helps people who are having trouble making their credit card payments. The program is designed to help customers maintain their finances during difficult life events (job loss, unpaid family leave or medical emergencies). Forbearance programs vary depending on the company. Sometimes you’re allowed to delay your payments for six month or longer or you might receive a reduction in your minimum monthly payment or interest rate. 

The forbearance programbenefits both the customer and credit card company. It protects your credit report and score because it prevents you from defaulting and the credit card companies get their money.

If you're interested in checking out your credit card company's forbearance program call their customer service department.

 

Warmly,

Marcia Brixey

Comments

[Kate Phillips]

Thanks for letting people know about this important topic. I believe that Forbearance programs are also referred to as "Hardship" programs.

What many people do not know is that you do not have to be behind on your payments in order to request a Forbearance or Hardship program. It is a much better option than (for instance) borrowing against your 401k or liquidating assets to keep current on your bills.

If you let your creditors know there has been a change in your income and ask them for help, you just might get it. If it is a credit card, you may have to voluntarily temporarily close the card (which is great, because you don't want to add to your debt anyway), but you could see your interest rate drop to 5% or even 0%.

I have one client who negotiated payments to a creditor down to 20% of the original amount, and I know someone else who cut her overall credit card payments by over 40%.

This is different from simply trying to negotiate a lower rate; these are programs designed to help those in precarious situations, not those who are "comparison shopping."

Richly,
Kate Phillips
www.totalwealthcoaching.com