hardship program
A temporary arrangement offered by creditors to reduce or defer payments during financial difficulty.
Example
“After explaining his job loss the credit card company offered a hardship program for six months.”
Memory Tip
HARDSHIP — creditors often have unpublished programs for borrowers in genuine difficulty.
Why It Matters
Understanding hardship programs is crucial because they can prevent severe damage to your credit score and help you avoid defaulting on debt during temporary financial crises. Knowing these options exist can be the difference between recovering from a setback and facing long-term financial consequences like foreclosure or bankruptcy.
Common Misconception
Many people believe that entering a hardship program will completely erase their debt or that it has no negative impact on their credit score. In reality, while these programs can prevent further damage, they typically still appear on your credit report and may slightly lower your score, though less severely than missing payments entirely.
In Practice
A homeowner with a 300,000 dollar mortgage loses their job and cannot make their 1,500 dollar monthly payment. They contact their lender and enroll in a hardship program that reduces their payment to 800 dollars per month for 12 months, allowing them to stabilize their finances while searching for new employment. After regaining income, they resume full payments and eventually catch up on the deferred amount.
Etymology
From Old Norse 'hardr' meaning hard — a program for hard conditions.
Common Misspellings
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