Balance feedback on a Hope / Fear mechanic for a horror D&D campaign

Hi everyone

I'm a first-time DM and I've been designing a horror-themed campaign. I've been experimenting with a system that involves Hope, Fear and Scars to show how characters slowly break under pressure.

This system is inspired by the Age of Umbra campaign of Critical Role.

The goal is to create a risk-reward loop where players are tempted to take on Fear for power. Risk losing everything.

Here's a simplified version of the mechanic:
Each character has three meters:
* Hope (0-6)
* Fear (0-6)
* Scars (0-6)

Hope represents courage and determination.

Players gain Hope through moments solving mysteries, inspiring roleplay and resting in a safe space.

They can spend Hope for things like: (They hold 6 Holp Top)

* +1d6 to a roll
* reroll a d20
* remove 1 Fear (costs 2 Hope)
* advantage on a save
* success on a death save (costs 4 Hope)

Fear represents stress and creeping dread.
Each point of Fear causes penalties, such as:
* Fear 1. Disadvantage on the Perception check after rest
* Fear 2. 1 AC. Disadvantage on the first Wisdom save
* Fear 3. Disadvantage on Insight checks
* Fear 4. Disadvantage on saves vs charm/fear
* Fear 5. Disadvantage on Concentration checks and -2 Initiative
* Fear 6. -1 To attack rolls

When Fear reaches 6 it resets to 0 and the character gains 1 Scar.

Scars are psychological changes that give strong bonuses but push the character closer to collapse.

At 6 Scars, the character dies or becomes an NPC.

Some examples of Scar bonuses are:
* Scar 1. +2 Perception
* Scar 2. +2 Initiative
* Scar 3. +1d6 damage vs aberrations/undead
* Scar 4. +2 Wisdome saving throws
* Scar 5. gaining Hope whenever you gain Fear

Players can also take Dark Bargains voluntarily gaining Fear in exchange for power like:

* 1 Fear → advantage on a roll
* 1 Fear → +10 ft movement
* 2 Fear → +2d6 damage
* 2 Fear → auto success on a skill check
* 3 Fear → critical hit

If the party takes a long rest outside a protected or safe location the DM rolls 1d12:

* 1 → Gain 2 Fear
* 2-4 → Gain 1 Fear
* 5-6 → Nightmare: Gain 1 Fear
* 7-8 → night: No effect
* 9-10 → Gain 1 Hope
* 11 → Gain 2 Hope
* 12 → Prophetic dream: Gain 1 Hope and the DM may reveal a small hint, vision or piece of useful information.

Does this system seem balanced, for a campaign?
Are the Fear penalties punishing or the Scar bonuses too strong?
Do you see any exploits?
Help a brother out.