Bank statements… the what, how and why?

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Have you ever considered why lenders ask for your bank statements when you apply for a loan? We will explain the purpose, benefits and implications in providing them with your application.

Lenders and Brokers alike have obligations under the NCCP Act 2009, to perform Responsible Lending checks on all customers who are borrowing for personal purposes (i.e. funds are required for private purchases) . Lenders interpret these regulations differently across the lending landscape. If you are borrowing for a home loan, most lenders will require 3 months bank statements to ensure you can afford the home loan you are applying for. The loan values are substantial and more diligence is required. If you are applying for a car loan or personal loan, you may not be required to provide them or just provide one months of statements.

So, what exactly are lenders looking for in your bank statements?

Bank statements over a 3-month period can provide the lender with an overview of your day-to-day spending habits and income. Here are some factors the Lender are concerned with:

  1. Account conduct: Is your account always in credit or are there overdraws? Regular account overdraws can signify financial distress or financial mismanagement. It is recommended you maintain a credit balance in your bank accounts.

  2. Ongoing commitments: It is important to disclose to the lender all your ongoing loans and liabilities. Bank statements can help a lender identify (and confirm) ongoing repayments for an active loan. Undisclosed loan commitments can also be identified.

  3. Salary credits: Payslips provided to support your application will confirm your income, but salary credits will be verified on the bank statements.

  4. Buy Now Pay Later transactions: Quite often these are overlooked by borrowers and are not disclosed to the Lender.

  5. Gambling: If there are regular gambling transactions on the bank statements, and they are considered significant versus income levels; this may be of concern to a lender.

  6. Living Expenses: Your declared living expenses provided at the time of application may be compared to the expenses (debits) on your bank statements.

Has the Lender asked for your statements to be provided through a third-party website?

Quite often a lender will request you provide your statements via a third-party source, such as bankstatements.com.au (Illion). These third parties have agreements with Lenders to provide the most up to date statements for all of your accounts linked to your internet banking. The process will require you to login via a link provide by the Lender or Broker, and your internet banking details will need to be submitted. If you have followed this process after applying for a loan it is suggested you change your internet login details. These 3rd-party providers are safe and secure but precautions should always be taken. If fraudulent activity is conducted because of using one of these services, your Bank may not cover any fraudulent loss.

Lenders will consider your bank account conduct and activity as one aspect in the assessment of your application. It provides them with a snapshot of your spending habits, but it is not the one and only piece to the assessment. Additional checks such as credit checks, previous credit experience, employment and income checks are all very important in determining the Lenders overall risk assessment.

If you are considering applying for a loan it is important to ensure great conduct on your bank statements to give you the best chance of getting your loan approved. Here are some tips:

  1. Always maintain a credit balance and avoid overdraws.

  2. Avoid pay day lender loans, as they will reflect on your bank statement. Lenders do not view these favourably.

  3. Disclose all loans and liabilities and ensure these are paid regularly and on time. Your statements will reveal these ongoing expenses.

  4. Avoid excessive gambling.

  5. Maintain a healthy savings balance.

Our team of brokers are available to you to discuss your finance and lending needs. Call us today on 08 9304 2010 or Learn More online.

The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.

Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation and needs.

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