Why banks ask for account statement for processing of loan?

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Why banks ask for account statement for processing of loan?
Every time you go to a bank to apply for a loan, one of the prerequisite document to be submitted with the bank for processing of the loan is bank statement of previous six months. So, what do banks try to find out from these statements and how it helps bankers in determining the loan eligibility of the applicant is discussed herein:

Financial position of the applicant: Through bank statements, banks try to figure out the financial soundness of the loan applicant. For this they examine the net income amount that gets credited every month, monthly savings and expenses pattern of the applicant, which enables to bank to decide the credit worthiness of the individual and whether he or she will be able to service the debt on time.

Cheque bounces: Bank statements also help the lender to find out cheque bounces if any and in case frequent cheque bounces are seen in the statement, it goes against the loan applicant. As then the bank questions the credit-worthiness as well as the loan repayment capacity of the applicant. Also, through the statements, banks try to find out if dues on credit card are all repaid well in time.

Other liabilities: In case some amount is tendered to or debited each month from your account towards some other financial institution as loan EMI, banks require complete details including the tenure of such a loan as well as the amount that remains unpaid. These details are crucial for the lender as it eventually reduces the monthly paying capacity of the borrower.

So, bank statement in fact decides your eligibility for loan i.e. whether or not bank will approve your loan application.


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