It is even more difficult to give any general rule regulating the amount of time to be allowed delinquents. No banker would arbitrarily decide that all his loans and discounts should receive 90 days' extension and no more. Illness or loss of work may cause a good customer to fall in arrears for a time; or a purchaser may spend money in improvements on the property, which would otherwise have been applied on the periodic instalments. Each case must be carefully considered on its merits, for in deciding such questions, not only the value of any particular piece of property must be considered, but also the reputation of the purchaser.
On the one hand, arrears should not be allowed to accumulate to such an extent that a surrender of the property would result in loss; on the other hand, it is unwise for a concern to avail itself of every technicality in order to foreclose at the earliest date legally possible, for such a reputation is thereby earned as will tend to drive away prospective customers.
To a concern selling on the instalment plan, a reputation for generous dealing is a valuable asset. It should be remembered that, even if arrears are allowed to run for a time after a considerable number of payments have been made, interest also is usually running, and though there will be a reduction in present cash receipts, the final profits will in no way suffer.
In cases where arrears have accrued and doubt exists as to the final disposition of the contract, it is good policy to omit the calculation of interest while this condition continues. This avoids the creation of a possibly fictitious asset, for when interest is included in these contract accounts, it becomes technically an asset and increases the amount of "Contracts" on the balance sheet. Should normal payments be resumed, it is a simple matter to add all interest so omitted.