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If you’re facing hardship and funds are tied up on necessities, pausing your debt payments could help get things back on track. Getty Images

Life has a way of surprising us — and not always in a good way. For example, a sudden job loss, a medical emergency or an unexpected expense can derail even the most carefully planned budget. When that happens, staying on top of debt payments can quickly go from manageable to impossible, especially if you’re already stretched thin by today’s high interest rates and rising living costs.

In times like these, many people decide to skip their monthly debt payments to ensure they can cover their basic necessities. But while letting your debt payments lapse temporarily might seem like the only option while you try to get your finances back on track, doing that can lead to late fees, damaged credit and collection calls — adding more stress to an already difficult situation.

You don’t have to face these types of repercussions if you need a temporary break from your debt payments, though. There are ways to formally pause or reduce your payments during a financial hardship without damaging your credit or putting yourself in a worse position financially. Below, we’ll detail where to start if you need some breathing room.

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5 ways to pause your debt payments during a financial hardship

It may be worth considering these strategies if you’re facing a temporary hardship and need to pause your debt payments:

Request a hardship program for credit cards or personal loans

Many banks and credit card issuers offer temporary hardship programs that you can enroll in, especially if you’ve been a long-time customer in good standing and are facing a qualifying hardship. These programs can reduce or pause your minimum monthly payments, lower your interest rate or waive late fees for a few months.

To take advantage of these programs, you’ll need to call your lender and explain your situation. Be ready to share documents if asked (like proof of job loss or medical bills). Note, though, that the program terms vary by lender, and not every request gets approved. Still, it’s worth asking if you need a reprieve to get back on track.

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Tap into payment assistance from nonprofit credit counselors

If you’re juggling multiple unsecured debts, like credit cards or personal loans, a credit counseling agency can help you enroll in a debt management program and create a repayment plan that works with your income. As part of the program, the credit counselor can also try to negotiate reduced interest rates and set up a single, more manageable monthly payment.

While most debt management programs won’t formally pause your payments, they can lower your monthly obligations significantly and stop fees from stacking up. The key benefit of that is that you stay current on your debt obligations without needing to file for bankruptcy or enter default.

Enroll in a debt settlement program

If you’ve fallen behind on your credit card or personal loan payments and can’t afford to catch up, a debt settlement program may offer a way to pause payments while working toward a resolution. These programs are typically offered through third-party companies that negotiate with your creditors to accept a reduced payoff, often far less than what you owe.

Instead of continuing to make payments to your creditors, you’ll typically stop paying them and start making more manageable monthly deposits into a dedicated account managed by the debt relief company instead. The money that accrues in that account will eventually be used to offer lump-sum settlements to your creditors.

Refinance or consolidate your debt

If you’re not in full crisis mode but can see financial hardship on the horizon, refinancing your debts or consolidating them into a lower-rate loan could give you more flexibility. This won’t really pause your payments, but it could make them easier to manage, especially if you can lower your interest rates substantially.

For example, consolidating high-rate credit card balances into a personal loan with a lower monthly payment can ease the pressure without needing to skip payments entirely. Be aware, though, that approval often depends on your credit score and income. So, this route may not be an option if you’ve already experienced a job loss or other major financial disruptions.

Contact your lenders and request forbearance

If you’re dealing with temporary financial hardship, be sure to also call your lenders, especially if you have federal student loans, a mortgage or even a personal loan. Many creditors offer hardship forbearance programs that can pause or reduce your payments for a set period (often three to six months).

Forbearance doesn’t erase what you owe, and interest may still accrue, but it can give you some much-needed breathing room. Just be sure to get the agreement in writing, understand when payments will resume and know whether a lump-sum catch-up will be required before taking this route.

The bottom line

If you’re struggling to keep up with your debt payments during a financial hardship, you have options, whether it’s a temporary hardship program, settling your debt for less or temporarily deferring your payments, but the clock is ticking. The longer you wait, the fewer choices you may have, especially if you start missing payments. So, if you’re facing financial hardship, make sure you take steps to hit pause on your debt payments as soon as possible, as doing so can help you stay afloat while you work toward getting back on solid financial ground.