ALEXANDRIA, Va.—Pentagon FCU is allowing eligible members to extend their current car loan terms up to 24 months, and lower their monthly payment.
Early reports this holiday season indicate strong member interest.
PenFed rolled the new offering out via a soft launch Dec. 6 and 40 members responded over the weekend. “Those results are very positive and encouraging,” said Kevyn Myers, EVP and COO.
Members who qualify for the extension receive PenFed’s current rate for the new term they select. The new interest rate must be equal to or greater than original interest rate on the member’s current auto loan.
“This is a great way for our members to increase cash flow,” Myers said. “The program allows them to reduce their payment without a refinance application.”
The reset process is completely electronic, Myers explained, with the option offered exclusively through PenFed’s Internet banking portal, PenFed Online. Members sign their documents electronically through DocuSign.
“What’s great about this program is that the member is in control of their payment reduction,” said Myers. “While some members may see a payment decrease of $40 to $50, others are seeing a decrease of over $100.”
As of mid-December, the $18.5-billion PenFed’s best rate for a new auto purchases and auto refinancing was 1.49% APR for terms up to 36 months; 2.49% was the best rate for used and longer terms. For members who purchase a new vehicle through the PenFed Car Buying Service, the best rate today is 0.99% on terms up to 36 months.
PenFed Partners With Rate Reset
The program is being offered as a result of PenFed’s partnership with Rate Reset, a McLean, Va.-based company that also offers a mortgage-product that allows for the rate to be reset under the Mortgage Harmony brand. PenFed has also offered its members a mortgage reset via that program.
To qualify members must be in good standing with the credit union, have sound credit, have made a minimum of 12 payments on their current loan, and have at least 12 months remaining on their loan. The new loan terms cannot extend beyond a total of 72 months.
“Not all members will be able to extend the full 24 months,” explained Myers.
PenFed planned to follow the soft launch with e-mails to eligible members that would include a link to a landing page that outlines the program on PenFed.org.
“Our long-term goals for this program are still being developed, but we anticipate there will be significant interest in the program,” said Myers. “We do not have plans to limit how long this offer is available. In fact, we plan on broadening who is eligible for the program in the future.”
While the CU is changing terms of loan, Myers said there are no compliance issues in the way.
“The program was designed to make the process very streamlined and easy for our members,” said Myers. “To finalize the request, our members need only to electronically sign a new promissory note that outlines the new payment, loan term, and finance amount.
PenFed’s CFO Rocky Mitchell said it was no coincidence the loan was launched near the end of the year. “Giving our members the ability to extend the term of a car loan provides them with increased flexibility and more cash in their pockets. This equates to greater spending power, which can be quite handy any time, but especially during the holidays.”
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