Amid skyrocketing fuel prices, Citizens Financial Group in Providence, R.I., is offering low-cost loans to help low- and moderate-income people heat their homes more economically.
The $153 billion-asset unit of Royal Bank of Scotland Group PLC is offering the unsecured loans to finance projects such as installing storm windows or upgrading heating systems. The annual rate is 1% for $1,000 to $3,000 or 3% for $3,001 to $10,000, for up to seven years.
The winterization loans are being offered at Citizens Bank branches in New England and the Middle Atlantic states and at Charter One Bank branches throughout the Midwest. (Citizens bought Charter One Financial Inc. of Cleveland in 2004.)
"We're trying to do long-term things that will help people not just this winter, but for several winters to come," said Robert Mahoney, Citizens' vice chairman.
Citizens began offering the winterization loans in its Middle Atlantic branches Jan. 12 and in its Midwest and New England branches Jan. 23. The programs will run until March 31 in the Middle Atlantic and April 14 in New England. To be eligible for the program, households must earn less than 80% of the median family income in their community.
Mr. Mahoney said there has been "significant" interest in the program.
"I'd be disappointed if we didn't have a few thousand people take advantage of this program," he said.
Citizens will not make a profit from the program, but it expects to gain customers and good will, Mr. Mahoney said.
James Ballentine, the director of housing and economic development at the American Bankers Association, said that the program is "encouraging" and demonstrates the flexibility that banks have to meet the specific needs of their community.
"Heating bills will continue to go up. … I think it's extremely important that this be used as a model not only for lenders in the Northeast, but across the country," Mr. Ballentine said.
He also said that this program is particularly important because it provides a cost-effective alternative to funding vehicles such as credit cards or payday loans that low-income consumers might otherwise use to make such improvements to their homes.
Steven Schlein, a spokesman for the Community Financial Services Association, a trade group representing payday lenders, said that winterization loans are "not in direct competition with payday advances."
Payday loans are generally for lower amounts of money and have shorter terms, he said. "It doesn't look like this loan is going to appeal to someone who really only wants to borrow $300," he said.
