Your Bank Statement as a Mirror: Reflecting on Your Financial Choices

by Jessica Rodz CashFacts is Your Hope to Quick

When you take out a loan, your lender will ask you to submit a bank statement dating back to at least three months in order to figure out your affordability. Your bank statement is the reflection of your finances; in other words, how you manage your money. It must show you to advantage so you can qualify for a loan. Whether it is a small loan like a personal loan or a large loan like a mortgage, no lender will give you the nod without perusing your bank statement.

A lender may or may not turn you down after a thorough check of your bank statement. The ultimate goal is to check your spending behaviour so you do not fall behind on payments during the loan settlement. Your bank statement can tell everything, such as:

·        How much you earn

·        How much you spend on regular expenses

·        Your credit card bills

·        Debt payments

·        Overdrafts and payday loans

Of course, all types of expenses will affect your account, but a lender is not bothered by all of them. They want to check affordability and they have their own ways to spot red flags in your bank statement.

What will lenders see in your bank statement?

Lenders generally ask for a bank statement for a period of up to three months to decide your affordability based on a number of factors. A lender will want to know if you are a responsible borrower as they will not take on the risk of loaning the one who often makes a default. The most important thing that a lender would look at to determine your affordability is the overdraft and other types of debts like payday loans.

It is not a bad idea if you take out an overdraft every so often, but if you exceed the limit regularly, your credibility will be called into question. As far as it is about other loans like payday loans, lenders will not find them favourable. If you frequently use these loans, it hints that you often run out of money as a result of poor financial management. Having payday loans also affects your credit rating. This will increase the interest rates when you borrow money next time. If the borrowing sum is large, you might be refused a loan.

What the other thing a lender does not want to show up on your bank statement is debt consolidation loans for bad credit. Consolidation suggests that you took on so many types of debts and now you are struggling to pay them off individually. This is not a good sign for you if you are looking to get the nod for a loan at the best interest rates. In addition, the other factors include:

·        Lifestyle

Lenders would like to get an idea of your lifestyle by looking over the type of expenses. This is especially important when you take out a mortgage application. For instance, if you are on frequent holidays, lenders might think that you may struggle with payments due to your dissipating habits.

·        Gambling

Gambling should not be an issue if it is done once in a while, but if you regularly gamble, it is a red flag; in this situation, your lender will straightaway turn down your application. They will likely assume that the money is being borrowed for gambling purposes.

Although lenders have ways to get their money out by selling security or using collection agencies, they will not want to embroil themselves in such a tortuous process. If they suspect that you cannot afford to pay back, they will simply refuse, especially if you are borrowing a large sum.  

·        The source of the deposit

Another thing a lender would like to see in your bank statement is the source of the deposit. As you know, you will have to put down an upfront payment, and a lender will trace the source of the deposit. Whether you could arrange money from your income or you got any windfall. If you have inherited it, it will not turn you down as long as you prove your repaying capacity.

Why do lenders check your bank statement?

Showing the bank statement to your lender can be daunting at first, but it reveals a lot about your ability in financial management. When you show that you manage your finances carefully and responsibly, your lender will give the nod to your loan application. You will be approved for low-interest rates. A bad credit could be a snag to get lower interest rates, but you when you show you can prove your repaying capacity, you will get the best interest rates.

Your bank statement will not affect the lending decision of a lender as long as you prove your repaying capacity, even if you have got a bad credit rating. You should try to show that you can consistently meet payments, and this you can do with the help of proving your employment, income sources, expenses, existing credit commitments.

Take the help of a broker

If you are looking to borrow money and you want to avail yourself of lower interest rates, you should try to contact a USA loan broker. They can help you find the best lender that matches your requirements. You can do the research work on your own, but this is a very time-consuming process.

A broker has a large panel of lenders, and as they have connections with them, it is likely that they introduce you to the one that lends money at a lower interest rate, even if your credit rating is poor.

The bottom line

A Bank statement can reflect your financial choices that directly influence your repaying capacity. You should manage your money responsibly so your lender does not get a chance to charge higher interest rates, restrict the borrowing sum or turn you down just because your credit rating is poor.

Take the help of a loan broker while applying for a loan, as they will connect you to a lender that matches your requirements. This will help you get the best interest rates despite a bad credit score.

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Created on Nov 20th 2023 08:37. Viewed 66 times.

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