WATERVILLE, Maine – The concept of allowing members to skip a loan payment isn't revolutionary, but New Dimensions FCU found a way to use this old staple to generate 322% ROI on loans with the skip-a-payment option.
Members can apply for the "Skip-A-Payment" feature on the $78 million credit union's website.
Under terms set by New Dimension's president and CEO Ryan Poulin, VP of lending Donna Farnham and marketing director Tina Morrill, members qualifying for "skipping" a payment must have: loans open longer than six months; have made current and on-time payments; possess accounts in good standing with the credit union; and not "skipped" any payments within the past calendar year.
Members can choose any time of year to skip a payment – but New Dimensions promotes the feature during the Christmas holidays when the need for extra cash is often greater.
Also, the 'skip' measure is applicable to almost any loan – excluding real estate loans, certificate loans, or lines of credit. In 2014, some 1,000 members qualified for the program.
"We used skip payment statistics from the fourth quarter of 2013 to give ourselves a benchmark and starting point to know if our target marketing for the 2014 holiday season would be successful," explained Morrill. "After analyzing the data from 2013 and comparing it to 2014 – we found that member engagement was definitely a success."
Now, the 2015 Holiday Skip-A-Payment has just under 1,500 members who qualify for the promotion – collateral and email marketing started arriving in their homes and in-boxes beginning Nov. 23, Morrill added.
Skip-A-Payment, which was created in-house, is not a new feature for the credit union.
"We have always offered the Skip-A-Payment feature, [but] it wasn't until the holiday season of 2014 that we took a targeted approach to the program," Morrill said. "Prior to this, the 'skip' option was just a generalized marketing item."
However, VP of lending Farnham cautioned that there are certain risks inherent with the Skip-A-Payment arrangement.
Namely, if the interest continues to accrue so the member then has two months of payments due; if the member does too many 'skips' during the full term of the loan, it can adversely affect their life and disability coverage (if they have it); if the loan is secured the credit union's loan-to-value exposure is higher.
But, from the credit union perspective, there is also a risk in not operating the Skip-a-Payment program, she added. "Borrowers love that their credit union not only offers Skip-A-Payment, yet promotes the product," she said.
