What Do Banks Try To Gauge From My Bank Account Statement?

Rachna Mittal's parents were worried she was wasting all her income purposelessly. They insisted the 27-year-old software engineer put her money to better use. Their persuasive tactics bore fruit when Mittal decided to invest in property, betting on the perceived growth prospects of this asset class. Mittal quickly applied for a home loan and submitted all the documents. However, the bank rejected her loan application, without elaborating on the cause. Could this be because Mittal is a single woman? Or, does it have to do anything with Mittal's buying behaviour? It is more likely that the bank rejected the compulsive buyer's loan application on the latter ground.

Also read: What If You Have A Grouse With A Bank?

Reading between the lines

There is a reason why banks ask you to submit with them a thick pile of documents, including your bank account statement, before they decide to grant you a home loan. Banks spend a considerable amount of time in carrying out a detailed study of these papers and decide whether their investment in you will be safe. At the end of the day, it is all about money and banks must ensure they do not invest in risky individuals. And hence, your bank account statement helps them understand your financial position.

So, here are four counts on which the bank might have rejected Mittal's application after assessing her bank account statement:

Running on credit

Her account statement shows that Mittal is paying EMIs (equated monthly installments) for two running loans that she took to buy a laptop and a car. This not only indicates that Mittal has other liabilities but also shows she relies heavily on credit.

Caution: Other liabilities limit your chances of getting a home loan. Pay off your previously taken loans right when you start thinking of buying a house.

Too much bounce

Her account statement showed there have been a number of cheque bounces owing to insufficient funds in her account. Multiple cheque bounces in your account summary indicate that you are not serious about repayment and keep a permanently low balance in your account.

Caution: The damage cheque bounces do to your credit history go far beyond the penalty that a bank imposes on you. Do ensure there are sufficient funds before you write a cheque.

Also read: Are Bank Statements Relevant In Your Home Loan Application?

Confessions of a shopaholic

Mittal has an expensive taste and this is the reason why her expenses always exceed her income. So much so, that by the end of the month, her account will be left with zero balance. This portrays Mittal as a compulsive buyer, with a weak financial position.

Caution: Home buying is a serious business. Even if your family is helping you with the down-payment, your own financial discipline will be evaluated before you are granted a home loan.

Not saving for the rainy day

Mittal earns a handsome package but she has not invested her money in any saving plans. It clearly reflects that Mittal could be a high-risk investment. This, too, would deter a lender from issuing you a home loan.

Caution: Your savings are reflective of your financial stability. Even if the amount is little, you must invest money in life insurance or other such plans.