Why Banks Ask for Bank Statement for Granting Loans?

Bank statement loans are one of the common ways of getting a loan. Get to learn about the different reasons behind asking for bank statements. If you are applying for a home loan at a bank, it is quite common for them to ask for a copy of your bank account statement, which includes a span of six months to several years. The document offers a very insightful perspective to the bankers that ultimately help in determining your loan eligibility.

Bank statements may be a very common criterion in the loan application but do you know who it all works? Are you aware of the things the bank tries to find with the help of your bank statement? If you are curious to find out, I am going to mention some of the compelling reasons why banks actually use bank statements as criteria for granting loans.

Applicant’s Monthly Savings

The bank statement offers an excellent opportunity for bankers to have an idea of the financial status and soundness of the person applying for the loan. These statements will help evaluate the savings habits and monthly expenses of the individual. All these factors are essential for finding out whether the candidate is creditworthy and has the ability to repay the loan instalments on a timely basis.

It will also be useful in the assessment of the Net Income that is credited to the account each month, and on the basis of these factors, the loan will be granted.

Applicant’s Financial Status

When they look at statements, they also look for cheque bounces. If frequent cheque bounces are noticed, it could negatively impact the application process. The individual may find it difficult to get a loan approved. It is because the bankers will assume that the individual is not financially sound, and may not be able to pay the loan installments timely. In addition, the bankers will also check that all credit card bills have been paid on time.

If you do not want to get a loan through your bank statement, you can also opt for a different alternate documentation loan like stated Income loans.

Applicant’s Other Liabilities

If there are monthly payments made to some other financial institution, the banker will try to find out the reason behind it. As it might reduce the monthly paying capacity, these monthly payments will have a role in playing in getting a loan. The bankers will ask for all the details about the loan, its tenure, and the amount that is still unpaid.

For individuals who do not have a steady income, asset depletion loan can be an excellent option. You will get to avail a loan if you have sufficient assets.

As the use of internet banking and credit cards are trending for making online purchases, bankers can make use of that information to understand your spending pattern and habits. It can be quite useful in determining loan eligibility against the income.