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What Is Discover’s 60/60 Plan? A Comprehensive Guide

An Overview of Discover’s Debt Relief Program

If you’re struggling with credit card debt – you’re not alone. Millions of Americans find themselves overwhelmed by mounting interest charges and minimum payments. That’s where Discover’s 60/60 plan comes in – it’s a debt relief program designed to help cardholders get back on their feet.So, what exactly is this 60/60 thing? In a nutshell, it allows you to pay off your Discover card balance at a reduced rate (typically 60% of what you owe) over an extended period of 60 months. Sounds pretty good, right?But like anything involving money, there are some key details to understand before signing up. We’ll break down all the nitty-gritty so you can decide if the 60/60 plan is the right move for your situation.

A Closer Look at How It Works

Here’s the gist: if you qualify for the 60/60 plan, Discover will let you pay off 60% of your outstanding balance over the course of 5 years (60 months) at a fixed interest rate. For example, if you owe $10,000, you’d pay back $6,000 plus interest over that 60 month period.The interest rate is typically pretty low – usually between 1-10% annually. So while you’re still paying interest, it’s way less than the default rate on your card (which can be 20%+).During those 5 years, you can’t use your Discover card for new purchases. But the big perk is that your minimum payments become much more manageable since the balance is reduced.

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Eligibility: Who Qualifies for 60/60?

Not everyone can hop on the 60/60 plan – you have to meet certain criteria first. According to Discover, the key requirements are:

  • You must be able to prove you’re experiencing legitimate financial hardship
  • Your account must be open and in good standing (i.e. not charged off to collections)
  • You can’t have filed for bankruptcy protection

Basically, Discover wants to see that you’ve fallen on hard times through no fault of your own (job loss, medical bills, etc.) and that you have a genuine desire to repay what you can.If you’ve simply racked up debt through overspending, you likely won’t qualify. The 60/60 plan is meant for those facing legitimate money troubles.

Pros and Cons of the 60/60 Debt Relief Plan

Like any financial decision, the 60/60 plan has its upsides and downsides. Let’s take an honest look at the potential pros and cons:

Pros of 60/60

  • Reduced principal balance – Only having to pay back 60% of what you owe is a huge relief.
  • Lower interest rate – The interest rate is way lower than a standard credit card APR.
  • Fixed monthly payments – Your payment amount stays the same each month, making it easier to budget.
  • Avoid bankruptcy – For many, 60/60 provides an alternative to filing for bankruptcy protection.
  • Pause collections – Enrolling stops further collections calls and letters from Discover.

Cons of 60/60

  • Credit score damage – Your credit will take a major hit when you settle for less than the full balance. This can make it harder to get approved for loans, mortgages, apartments, etc.
  • Tax implications – The amount of debt forgiven (40% in this case) may be considered taxable income by the IRS. You’ll want to consult a tax pro.
  • Closed credit line – You can’t use your Discover card at all during the 60 month repayment period.
  • Fees may apply – Discover could tack on fees to enroll in 60/60, though details are scarce.
  • Not a quick fix – You still have to make payments (albeit lower ones) for the next 5 years.

As you can see, there are significant trade-offs to weigh. The 60/60 plan can provide much-needed breathing room – but it’s not a get-out-of-debt-free card by any means.

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How to Apply for Discover’s 60/60 Program

If you’ve decided the 60/60 plan is right for you, actually getting enrolled takes some leg work. Here are the typical steps:

  1. Gather documentation – You’ll need to prove your financial hardship, so collect evidence like pay stubs, medical bills, job termination notices, etc.
  2. Call Discover – Reach out to their financial hardship department (the number should be on your statement) and explain your situation. Don’t wait until you’re seriously delinquent.
  3. Propose a plan – Discover may counter with their own 60/60 proposal based on your balance and income. You can negotiate the interest rate and terms.
  4. Agree to conditions – If you accept Discover’s offer, you’ll likely have to agree to close your account and make payments via money transfer or automatic debit.
  5. Get it in writing – Once terms are finalized, insist on getting the details of your 60/60 agreement in writing before making your first payment.

The approval process can take some time as Discover reviews your finances. Be patient, persistent and don’t let them bully you into a deal you can’t afford.

H3: Alternatives to Consider Besides 60/60

The 60/60 plan isn’t your only option for dealing with overwhelming Discover card debt. A few alternatives to explore include:

  • Balance transfer credit cards – If you still have decent credit, you could transfer your Discover balance to a 0% APR card and pay it off interest-free for 12-18 months. Just don’t miss any payments!
  • Debt management plan – A non-profit credit counseling agency can negotiate lower interest rates and fees with all your creditors, including Discover. You pay them one affordable payment monthly.
  • Debt settlement – You can try to negotiate a lump-sum settlement directly with Discover where you pay a portion of the balance to close the account. This severely hurts your credit though.
  • Bankruptcy – As a last resort, bankruptcy can discharge your Discover debt entirely. But it nukes your credit for years and comes with other consequences.

The right path depends on your level of debt, income, credit score and overall financial profile. Don’t be afraid to consult a professional who can review your situation objectively.

Tips for Making 60/60 as Painless as Possible

If you do end up on Discover’s 60/60 plan, there are some strategies that can make the process smoother:

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  • Automate payments – Set up automatic payments from your bank account so you never miss a due date and default on the agreement.
  • Avoid new debt – With your Discover card closed, resist the temptation to open new credit lines. That could restart the debt cycle.
  • Budget diligently – Review your budget regularly and cut costs where possible to ensure you can afford those 60/60 payments.
  • Build emergency savings – Try to sock away even a small amount each month for unexpected expenses that could derail your debt repayment.
  • Stay employed – Obviously easier said than done, but a stable income is crucial for making it through all 60 months.
  • Check annual reports – Each year, Discover should send you an account report. Review it carefully for errors or missed credits towards your balance.

The 60/60 program gives you a lot of runway to get debt-free – as long as you make it a priority. With some discipline and smart planning, those 5 years can fly by.

What Happens After Completing 60/60?

Light at the end of the tunnel! Once you make your final 60/60 payment to Discover, you’ll receive a confirmation letter that your account has been fully settled and paid off. Rejoice!From there, you’ll want to keep a close eye on your credit reports from the three major bureaus (Experian, Equifax and TransUnion). Discover should update your account as paid/settled with a $0 balance.However, don’t be surprised if that settled debt lingers as a negative item on your credit reports for up to 7 years from the initial delinquency date. It’s an unfortunate scar that takes time to heal.The good news is that by sticking to the 60/60 plan and avoiding any other missed payments or delinquencies, your credit scores should gradually recover over those 7 years. You may even be able to use other credit products like secured cards or credit-builder loans to remortgage your reports faster.Either way, completing Discover’s 60/60 program is a huge accomplishment and fresh financial start. Celebrate it – then get back on track towards your bigger money goals, like saving for retirement or buying a home.

The Bottom Line on Discover’s 60/60 Debt Relief

There’s no sugar-coating it – dealing with debt is extremely stressful. When those calls start coming in and the bills keep piling up, it can feel like you’re drowning with no lifeline in sight.For many Discover cardholders, the 60/60 plan serves as a much-needed life raft to stop treading water and chart a course back to calmer financial seas. By reducing your principal balance by 40% and extending the term, those monthly payments become much more manageable.But 60/60 isn’t a magic wand to make your money troubles disappear. You’ll still need to make those payments diligently for 5 long years. Your credit will take a major beating in the short-term. And you may even face a surprise tax bill from the IRS.So while 60/60 can provide breathing room, it’s not a cure-all for debt. You’ll need to put in the hard work of budgeting, living frugally, and avoiding future overspending to truly right your financial ship.The bottom line? Don’t make any hasty decisions about debt relief. Carefully review your options, crunch the numbers, and choose the path that gets you to debt freedom as quickly and responsibly as possible – even if that means some temporary credit score pain.

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