Why banks ask for bank statement for processing of loan?
When you go to a bank to apply for a loan, one of the necessary documents to send with the bank for loan processing is a bank statement from the previous six months. Bank statements are an excellent method for keeping track of one's finances. They will assist account holders in keeping track of their accounts, identifying mistakes, and identifying spending patterns. To ensure that their records match the bank's records, account holders can check their accounts on a regular basis—daily, weekly, or monthly. Overdraft costs, mistakes, and fraud are all reduced as a result of this.
If any inconsistencies are discovered, they must be reported to the bank as soon as possible. Account holders usually have 60 days from the date of their statement to appeal any mistakes. Monthly announcements should be held for at least a year.
What Is a Bank Statement and How Does It Work?
A bank statement (also known as an account statement) is a monthly document submitted by the bank to the account holder that summarises all of the account's transactions for the month. Balance numbers, as well as a full list of deposits and withdrawals, are included in bank statements.
A bank gives an account holder a bank statement that indicates the account's comprehensive operation. It helps the account holder to view all of their account's transactions. On a regular basis, banks deliver monthly statements to account holders. Furthermore, the transactions on a statement are usually listed in chronological order.
So, what do banks try to figure out from these claims, and how does it help bankers determine the loan eligibility of the applicant?
The Applicant's Monthly Savings
Examining the financial statements gives the bankers an idea of the applicant's financial soundness. The Bankers aim to get a sense of the Applicant's monthly expenses and saving habits from these statements. These are needed to ensure that the Applicant is creditworthy and that the Loan Instalments will be paid on time.
It also aids bankers in determining how much Net Income is credited to the Individual's account per month, which is used to decide Loan Eligibility.
The applicant's financial situation: Banks examine bank statements to determine the loan applicant's financial stability. They do this by looking at the applicant's net monthly income, monthly savings, and expense patterns, which allows the bank to determine the individual's credit worthiness and whether he or she will be able to repay the loan.
Cheque bounces: Bank statements often assist the lender in identifying any cheque bounces, and if the statement shows a pattern of repeated cheque bounces, it is a red flag for the loan applicant. As a result, the bank challenges the applicant's creditworthiness as well as his or her ability to repay the loan. Banks also check accounts to see if credit card bills are charged on time.
Other liabilities: If you have a loan EMI that is tendered to or debited each month from your account to another financial institution, banks will need all of the information, including the loan's tenure and the sum that is still owed. These information are critical for the lender since they reduce the borrower's monthly payment ability. So, your bank statement determines your loan eligibility, i.e., whether the bank will accept your loan application.