Credit union offering grace period on loans
A Pearl River-based credit union that has seen an increase in delinquent loans as the economy has slumped is allowing borrowers to skip their July and August payments.
The Palisades Federal Credit Union said it decided to start the program because it realizes prices are rising and wage growth is slow.
To qualify, a member must be in good standing. Interest will continue to accrue on the loans of the members who take advantage of the program.
Though the program reduces the amount of money flowing to the credit union for two months, it could be beneficial in the long run, a credit counseling expert said.
Thomas Fox, the community outreach director of the Cambridge Credit Counseling Corp. in Agawam, Mass., said members who take advantage of the program may be more conscious of making timely payments once the grace period ends.
â€œWhat happens is a psychological effect,â€ he said. â€œPeople may say â€˜Wow, these guys (the credit union) helped me out,â€™ and the next time a payment comes due they may work a little harder to make it on time.”
Fox cautioned, however, that itâ€™s important for borrowers to realize that interest in still accruing. He also said that anyone who is so strapped that they need to take advantage of the program should re-examine their budget to see if they can make adjustments so that theyâ€™re not cutting it so close.
Fox said credit card companies sometimes offer people the chance to skip payments. Credit card companies often extend this to the customers they call their â€œdeadbeats,â€ he said. Those are the customers who always pay on time, meaning they do not incur interest payments, he said.
The credit union has $147.23 million in assets and 9,052 members, according to information filed with the National Credit Union Administration.
The amount of the credit unionâ€™s loans that are delinquent by two months or more rose 40.9 percent to $560,572 by the end of June, compared to the end of March.
The figures show an even more dramatic rise in loans in the early stages of delinquency. Loans on which borrowers were behind by one to two months totaled $842,190, nearly five times as much as at the end of March.
Mark Welshoff, the president and chief executive of the credit union, said in a statement: “Being a non profit organization, Palisades is truly committed to our members quality of life. Through this exciting program we are fulfilling our promise to fit into our membersâ€™ lives, not the other way around.”