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#1131001 - 02/17/09 07:07 PM Extension without interest payment?
LoanLady Offline
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Joined: Sep 2006
Posts: 109
Is it permissable to do a 2 month or 3 month extension without having the customer pay the interest due? I just mean on consumer notes, lets ignore Real Estate and all that extra documentation.

We currently require them to pay the interest for the months they are extending, but mgmt. would like to offer "no payment" extension to help consumers that have recently lost their jobs.

Can anyone point me in the right direction? Does anyone else offer a program like this?
Thanks...

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#1131026 - 02/17/09 07:36 PM Re: Extension without interest payment? LoanLady
swiggles Offline
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swiggles
Joined: Aug 2001
Posts: 7,333
I don't think there's any prohibition in the Finance Code. We do this on occasion. I think the only prohibition would in connection with a home equity loan. Hopefully, the loan officer has established the borrower's ability to repay 2 or 3 months of accumulated interest. Will the regular payments resume afater the two or three month extension? If so, will the accumulated interest cause negative amortization? Also, as a matter of practice, we require the borrower to pay interest accrued, to date, prior to allowing an extension.
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