If you’ve been researching personal loans, you’ve probably noticed that all lenders seem to ask for your bank statements. Although it seems a little personal, they’re actually one of the most important documents you’ll provide when applying for a loan. Let’s take a look at why personal loans require bank statements and what your lender is really looking for.
Bank statements confirm your identity
First things first, lenders need to make sure you are who you say you are! Your bank statements help confirm your identity and show that the information you provide is legit.
With fraud and identity theft becoming more common, this also means your lender can make sure they’re dealing with the real you and not someone pretending to be you. Asking for bank statements gives the lender the chance to double-check your personal details like your name, address and account numbers. It’s better to be safe than sorry, as they say!
Bank statements verify your income
We know it’s a topic you usually avoid but we’ve got to break the ice on your income. While payslips are useful, a loan with a bank statement shows an even clearer picture of your financial situation and can help verify your income. Your statements act as proof of how much money you have coming in and how often, as well as regular deposits from your employer, freelance gigs or even side hustles.
Showing you have steady income is one of the best indicators that you’ll be able to repay the loan. If your income checks out, you’re one step closer to getting the funds you need whether it’s for a travel loan, wedding loan or renovation loan.
Bank statements show how reliable you are at repaying loans
Lenders aren’t just interested in how much you make, they also want to know how well you manage your money. Looking at your financial habits can help lenders understand whether you’re likely to be a reliable borrower. Do you pay off credit card balances regularly and are you making regular payments on existing loans? If you’ve got a history of keeping up with your repayments, this works in your favour!
Don’t sweat it if your accounts are less than perfect as lenders might still consider your application based on other things, like your current income or how you’ve managed to get back on track financially.
H2: Bank statements show where your money regularly goes
Lenders don’t just stop at how much you earn, they’re also keen to see how you spend it. Do you budget religiously for essentials like rent and groceries, or are you splashing the cash on shopping sprees?
While everyone has different spending habits, this will show lenders your financial priorities. They’ll usually take a look at your fixed expenses like rent and bills before comparing them to your income to see how much room you’ve got in your budget for loan repayments. If your bank statements show a healthy balance between income and expenses, you’re more likely to be approved!
Bank statements show if you can afford a new personal loan
Finally, your bank statements help lenders determine if you can actually afford a loan. It sounds like a weird thing to note because there’s a reason you’re applying for a loan, right?
One of the key things lenders check is your debt-to-income ratio. Without boring you with facts and figures, this is basically how much debt you have compared to how much you earn. This helps lenders figure out if taking on another loan would be manageable and you’ve got enough disposable income after your regular expenses to comfortably make your loan repayments. If your statements show that your income consistently covers your outgoings with room to spare, then you could be in luck!
On the other hand, if your expenses are already eating up most of your income and it’s looking like you’ll be financially stretched, lenders may think twice before approving your application.
Providing bank statements when applying for a personal loan may seem like a hassle but it’s an essential part of the process. It helps lenders confirm your identity, verify your income, assess your reliability, understand your spending habits and more.
Bank statements offer a clear window into your financial life so next time you’re asked to provide your bank statements, you’ll know exactly why they’re so important! Not only do they help you get a loan, but also ensure you’re in a good place financially to take one on.
Ready to apply? At Rapid Loans, you can provide your bank statements online through our secure portal as long as you have internet banking.
This article is general in nature and not intended as a source of financial advice, nor does it take into account your individual financial situation.