Overview
Overdraft is a simple, cash-loan-like product starting with a 30-days grace period.
SaFi will offer a retail overdraft with a lower principal than personal loans.
One customer can have one overdraft at a time.
The use of funds can be restricted for specific purposes - based on transaction type.
The goal is to credit it in real-time to the main account without any additional info required from the customer (besides data from onboarding) and build the credit history.
General loans specs (applicable both for Personal loans and Overdrafts)
For a new SaFi customer, loans KYC and the first risk assessment is done during the onboarding process.
Terms and conditions of loans: It is covered in SaFi’s master agreement which customer agrees to while onboarding. The customer does not need any additional legal approval when getting a new loan.
Credit line recalculation:
The customers should not be able to initiate recalculation - unless require “more money” (not MVP functionality)
The Recalculation of the credit line is triggered based on customer interaction, time, etc. Exact automated logic is defined by the Risk engine.
Repayments: manual repayment is accepted only from main account and unlocked pockets.
The frontend should change if customer is late with payment
No new loans can be applied for
Warning messages, colours to remind user about being late with repayment
Instalment and any fees should be automatically deducted from the main account, if enough balance is available. The exact logic is defined by the Debt Manager service.
the due date is taken into consideration, see Debt manager for more detail
Sequence of debiting the accounts
(a) subscription fees of the bank
(b) penalties/charges for past due loans
(c) penalties/charges for overdraft
(d) past due loan (principal)
(e) past due overdraft (principal)
(f) interest for loan (overdraft)
(g) current due for loan (principal)
(h) current due for overdraft (principal)
(i) other subscriptions with other merchants (auto-debits)
Product specs
The loan amount is credited to the customer’s main account, as described here. Basically, funds are transferred to the overdraft address of the customer’s main account.
Restrictions applied
No cash withdrawal
No manual transfer to other accounts
Customers can not change (restructure) the loan in any other way than increasing OD to the max limit. Can not ‘postpone’ repayment and move from the grace period to the next. Backoffice/Collections should be able to modify the loan if necessary.
Customers can get the loan in more ‘pieces'. E.g if there’s a limit of $500, the customer gets $320 successfully and then a couple of days later gets the $180 if he/she wants to. The free Grace Period will not change though and neither do due dates. The conditions of the loan (fees, IR) could change though.
No partial manual repayment is available, only the full amount.
Repayment timing
The first month is the free grace period w/o fees. Repayment is free, so is the usage of the loan.
Missed due date nr.1 (after 1st month): A one-time, fixed additional fee is added to the loan. The total fee is charged right after missing the due date. When repaying, the amount is independent of the days passed since due date, e.g. it’s not calculated on a daily basis.
Missed due date nr.2 (after 2nd month): A monthly, percentage-based penalty fee will be applied. Similarly to the fee after the 1st due date, the total fee is charged after missing the due date.
Repayment at due date: money is automatically withdrawn from the account
1st due date
Instalment:
if there's enough balance available on the main account, automated withdrawal.
If there’s not enough balance, no automated withdrawal yet.
Extension fee
if there's enough balance available on the main account, automated withdrawal.
If there’s not enough balance, fee is added to the debt and deducted from any incoming transaction immediately.
2nd due date: Overdue overdraft requirements, after 60 days
Customers are notified about the milestones of a loan (loan successfully opened, instalment deducted, loan closed)
Risk remark: if full loan amount gets activated on customer's account, line of credit may have an impact on capital requirements of the banks - so it may be better to "deactivate" in case client is not using overdraft and "activate" in case of need. TBD within SaFi.
