Just when we thought we heard it all in terms of the strange scenarios you encounter in credit, up pop’s something new, the problem of ‘over-saving’. For most of us the problem is ‘saving anything at all’, but in some cases the potential borrower goes far beyond what is good for them.
Here is how it manifests.
So far we have seen this mainly in people who are at average wage and below, and how it occurs is that in an effort to save as much as possible that they then make their bank statements look bad.
I got a call from one of our brokers to look at a case they had, the bank statements didn’t look good, they had referral fee’s and were in overdraft.
A referral fee is where you might have no overdraft and you go overdrawn, you might have €10 left and go to withdraw €200. In this case you’ll be minus €190 and see a thing called a ‘referral fee’ which is typically €4.44 it means that you broke the terms of the account but that the bank let you do it. It’s like an ‘unofficial overdraft’ in a way.
If you are seriously overdrawn it also looks like what is known as a ‘hardcore overdraft’ which means that your baseline is negative every month, for instance, if you are €2,000 overdrawn every month then it’s the same as if you have a €2,000 loan that is rolling over month to month.
People who over-save are so desperate to get their deposit saved up (the savings account looked great), that they mess up other accounts which the lender looks at and in doing so, good intentions can become misdirected.
I suppose what they say is true, stick around long enough and you’ll see it all!