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 clearly the income you are living off. This is also a timely reminder that cash-in-hand jobs are considered unacceptable income. People accepting cash in hand work are avoiding paying tax and are effectively 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 are terrible with your loan repayments and are even in arrears, the likelihood of you getting approved will be far less if at all. You may have a very valid reason as to why but if it is just 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 it up by viewing your statements. On top of this, 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 is generally considered irresponsible conduct, particular if your account is regularly overdrawn and hit by fees. Look over your last 3 months bank statements, do they reflect someone responsible?
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 an applications progress. It is also free. Be mindful as some lenders (not us!) may charge an additional fee if you choose not to use their bank statement service, so do your research before you commit to a particular personal loan lender. However you decide to provide your bank statements for a personal loan application, please be aware of how important it is. It could be the key as to whether your loan application is successful.