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Any Problems With "Skip-A-Payment" Loans

Answered by: 
Andy Zavoina

Question: 
We are looking at having a loan program, where you can have a "Skip a Payment" through out the term of the loan designated by the customer. not a deferral but the customer can pick out 1 month in a 12 month period where they can skip a payment. so for example on a 60 month loan theymake 55 payments. They can pick a Christmas month or a back to school month, what ever they desire but only make 11 payments per year.
Answer: 

In your 60 month example I assume the payments will be amortized over 55 payments or will extend 65 months with those at the end making up for the skipped payments. Unless your state law prohibits it, it should be doable. The hardest part would be disclosing the payment streams on your contracts and programming them on your computer system. Credit insurance covering the entire term and payment stream is another hurdle to consider.

Few federal regulations define what loan programs, such as you propose, are allowable. State laws may require consecutive payment streams based on products but my (albeit limited) experience does not indicate that you'll have a problem here offering it, just administering it.

First published on BankersOnline.com 3/5/01

First published on 03/05/2001

Filed under: 
Lending
Filed under lending as: 
Loans

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