Personal Loans: Why do you need to provide bank statements?

When you apply for a personal loan, or any other loan, are you curious as to why lenders ask for your bank statements?

The truth is your bank statements provide a huge amount of information without you realising, and could ultimately determine if your loan is approved.

Before you next apply for a loan be mindful of the following 5 things personal loan lenders are cross checking.

1. Bank statements confirm your identity

Starting at the top, a lender will use your statements to verify your name and current address. Straight away, if your name or address is different from what you completed on your application form, this will cause further questioning and can hinder your assessment process.

2. Bank statements confirm your income

Regardless of what you say your income is on your personal loan application, a lender will still verify this by checking the salary deposits into your bank account.

If the figures don’t match, the lender will rely on the income they see on your statements as this is the confirmed income you are living off. This is also a timely reminder that cash-in-hand jobs are considered unacceptable income. Cash in hand work effectively avoids paying tax and is considered breaking the law.

3. Bank statements show how reliable you are at repaying loans

If you have any current loans, a lender will check your statements to see how efficient you are with your loan repayments and will also look for any dishonours. If you handle your current loans well, this will go a long way towards you being approved for another personal loan.

On the other hand, if you struggle with your loan repayments or are in arrears, there is less likelihood of you getting approved. You may have a very valid reason as to why, however if it is due to poor money management you will need to work on improving your situation before you next apply.

4. Bank statements show where your money regularly goes

When you complete a loan application you need to declare all of your loans (e.g. car loans, personal loans, bad credit loans, housing loans, credit cards, store cards etc.) as well as all your regular monthly expenses. If you forget or neglect to include any, the lender will still pick them up when reviewing your statements.

On top of these, a lender will gain an understanding of your general bank account conduct. Withdrawing all of your money as soon as it is deposited or showing regular gambling transactions are two behaviours that many lenders see as a red flag, particular if your account is regularly overdrawn and hit by fees. Look over your last 3 months bank statements, do they show responsible behaviour?

5. Bank statements show if you can afford a new personal loan

If your bank statements show that you never have any money left in your account or you are constantly overdrawn and are charged dishonour fees, it sends a clear message to a potential new lender that it’s unlikely you’ll be able to comfortably meet your new loan repayments.

Lenders must be responsible when approving personal loans, whether it be a car loan, bond loan or even a small cash loan. ASIC is a government body who monitors lenders to ensure they never cause financial hardship by giving an inappropriate loan, so if a lender has any doubt about a customer’s affordability, they will generally decline the application.

As you can see, your bank statements reveal a great amount of information and help lenders determine whether a personal loan should be approved. Many lenders, like us at Fair Go Finance, now provide a bank statement service that helps customers provide their bank statements immediately without having to manually send them in. The bank statement service we offer is fast, reliable and can speed up your application’s progress. It is also free.

In summary, please be aware of how important your bank statements are when you apply for a personal loan. They have the ability to determine whether your loan application is successful or not.

FAQs:

Is it normal for loan companies to ask for bank statements?

Lenders usually ask your bank statement to help lessen the risk. At Fair Go Finance, we check 90 days’ worth of bank statements to see how you manage your finances and it helps us see what loan you can afford.

Why are bank statements important when applying for personal loans?

Bank statement helps lenders to get an idea about how responsible an applicant manages their finances. It will also help your lender to assess which loan an applicant is eligible.