Sending the Wrong Message

It’s cap-and-gown season, and captives and credit unions are touting their graduate auto loan offerings. A quick look at the promos, and one trend is clear: delayed payments are the graduation gift of choice, with 60-to-90-day deferments the norm.

The whole concept of payment deferments seems contrary to the habits lenders should instill in their customers, particularly first-time buyers. In fact, it seems like the delayed-payment strategy might be setting up customers for a missed payment, which would result in late fees and most certainly leave a sour taste in their mouths.

How about this for a college grad financing program: Make your first six months of payments on time and you get $50 off your seventh month’s payment or a $50 gas card.

Shouldn’t we be rewarding good financial behavior rather than encouraging poor payment habits?

Tags: college, deferment, grad, graduate, incentive

1 member likes this

Comment by Chris Green on June 7, 2011 at 2:22pm: Being a national repossession & skip trace firm, we have seen and heard so many different enticement programs that we are no longer shocked. The ones who are shocked are the parents or college students when they realize they cannot possibly pay what they agreed to. It is rather disheartening at times to say the least. It cannot be blamed only on credit unions, car dealers nationwide have various grad promotions.

Comment by Frank Rauscher on June 11, 2011 at 5:40pm: Auto lending is "collateral lending". The institution with the promotion just needs to understand how much of the loan is really unsecured and for how long at the time that they make it. If it is the borrowers first loan, then it would be a good idea for someone to provide some budgeting and credit counseling. It would be irresponsible to give a loaded gun to a young person without some instruction, why not give counseling with their first loan?