With lenders required to ensure they are lending responsibly, bank statements have become a key part of car finance assessments over the past few years. This is primarily because bank statements show not only your monthly expenses and spending habits but also your account conduct, allowing lenders to better assess the likelihood of missed repayments in the future.
For most people, the thought of a lender looking through your bank statements might be overwhelming and confronting. With so much information about your spending and account habits displayed in your statements and each lender analysing and using the data differently, it’s natural to feel uncertain. Given that most lenders don’t make their bank statement assessment process available to view, people are often left wondering things like, “Will they find something I’ve overlooked?” and “Could this affect my chances of securing the loan I want & need?”
You’re not alone in feeling this way. Every day, our team hears from people who share similar anxieties about their Bank Statements. The good news is that here at Fox Finance Group, our experienced team of Lending Specialists can walk you through exactly what lenders look for and how they will assess your statements, removing any feelings of anxiety or confusion and giving you the clarity and confidence to secure the car finance you need!
One of the biggest challenges is not knowing what banks and lenders are actually looking for in your bank statements when you apply for car finance. It’s like trying to ace a test without knowing what’s going to be on it. Is it your income, spending habits, or something else entirely that might influence their decision? The uncertainty can be nerve-wracking.
Lenders are primarily looking for stability and financial responsibility. They want to ensure that if they approve you for a loan, you’ll be able to repay it without putting undue strain on your finances. Knowing exactly what they are looking for can help you better prepare your statements for assessment and boost your chances of approval.
Here are the top 10 things lenders focus on when reviewing your bank statements for car finance and how you can use these to get approved the first time.
Lenders want to see regular, stable income deposits. This shows them that you have a reliable source of income – an essential factor when applying for car finance. If your income fluctuates or you rely on irregular payments, it might raise concerns. To improve your chances, make sure you can show consistent income, whether it’s through a salary, self-employment, or other stable sources.
Lenders prefer to see that you’re not spending beyond your means and that the amount leaving your account each month for your expenses is less than the amount that goes in as income. Lenders will use bank statements to calculate your monthly expenses, so if you have large transactions occurring frequently, even though these may not be regular ongoing living expenses, lenders will consider this part of your regular spending habits and count this towards your monthly expenses. This also counts for things like ATM withdrawals and Buy Now Pay Later accounts like Afterpay and Zip Pay.
To prepare your bank statements for quick approval, try to demonstrate responsible spending patterns in the months leading up to your application and minimise expenditure on discretionary spending, as this will show you have plenty of capacity to make repayments on your new car loan.
Maintaining a healthy balance in your account signals financial responsibility. A positive balance gives lenders confidence that you manage your money wisely and that there will be money in your account available for repayments on your new car loan. If your account balance is consistently low, lenders may view this as you struggling to manage your account and day-to-day expenses. To avoid this, aim to keep a financial cushion in your account to show you have the capacity for a new commitment and that you’re in control of your finances. This also helps to prevent the chance of unexpected expenses coming out of your account that can draw the balance close to or below zero.
Banks look at how you use overdraft facilities. Frequent overdraft use might suggest financial instability; and as a result, lenders prefer to see moderated use of these sorts of facilities. Using your overdraft isn’t a bad thing and, when done the right way, is an effective financial tool, but constantly dipping further and further into it and never returning your account balance back to positive could indicate you’re struggling financially and needing the credit to afford general living expenses. If possible, avoid excessively using your overdraft in the months before applying for car finance.
Timely repayment of existing debts is crucial. Lenders want reassurance that you can manage financial commitments without any delays or missed payments. A history of consistent and timely repayments reflects positively on your ability to handle future car finance repayments. On the other hand, lenders are prohibited from lending to someone who cannot maintain their current commitments and loans. So, if you have any current loans or credit card commitments, focus on keeping up with payments to show financial responsibility. This also helps to keep your credit score nice and high so that you can get the best deal possible!
Consistent contributions to savings accounts indicates good financial discipline, something that lenders value when considering your loan application. Even small, regular deposits into a savings account show that you’re financially prudent and plan for the future. Building a savings habit, even if it’s modest, will reflect well on your application.
Banks will flag any unusual or irregular transactions, such as high-value purchases and transfers to external accounts. This sort of account conduct is seen as risky, and as a result, lenders will require detailed explanations about the purchases and transactions to remove them from their assessment. This can slow down the approval process and raise further questions for lenders if the explanations don’t make sense or can’t be substantiated.
To avoid this potential hurdle, it is important to remain aware of your spending habits and remember to log any large one-off or irregular transactions. This will allow you to have these explanations and the evidence to support readily available for the lender, which will help to get a quick and easy approval.
A large number of gambling-related transactions can raise concerns for lenders, as this may indicate risky financial behaviour. Occasional gambling won’t hurt your application, with most lenders allowing a small percentage of your monthly income to be spent on gambling. However, frequent or high-volume gambling transactions can be a red flag, so it’s best to avoid any significant gambling activity before submitting your bank statements to a lender for review.
A history of returned direct debits or bounced payments suggests financial strain and could be a red flag for lenders assessing your loan application. Lenders see this as a sign you might struggle to manage your finances and will most likely miss your new car loan repayments. To improve your chances of approval, ensure all direct debits are covered and made without dishonouring in the months leading up to your application.
This is also where having a small financial cushion in your account comes in handy, as sometimes direct debit payments come out of your account at different times throughout the week and month, which can lead to unintended dishonours on direct debits. In this instance, the missed payment must be made up as soon as possible, to show a lender you had the funds available to make the payment.
Some people may be unaware, but all loans are not created equal. Lenders will look at smaller loans (loans below $5k) in a different light when compared to larger loans (loans above $5k). These are generally viewed as a sign someone requires additional credit to afford their expenses and may be living paycheque to paycheque. Payday & pay advance facilities are one of the quickest ways to have your application flagged as high risk and most likely declined, especially if there is frequent use of these facilities or multiple providers present in your bank statements. To avoid heading down this rabbit hole, avoid accessing both payday and pay advance loans.
Applying for car finance doesn’t have to be stressful. At Fox Finance Group, we specialise in helping people like you confidently navigate the process. With over 18 years of experience, our team of lending specialists knows exactly what banks and lenders are looking for. Understanding the key areas that matter most to lenders empowers you to take control of your financial situation and secure the best deal possible.
With the right guidance and a clear understanding of the lending process, you can avoid common challenges and increase your chances of approval on the first try. No matter what type of finance you need, Fox Finance Group will be by your side, ensuring a smooth, transparent, and stress-free experience that helps you secure the loan you want and need.
Ready to get started? Apply today and take the first step towards car finance approval. For more information, visit our Car Loans page, or if you have any questions, our team is ready to help and can be reached at 07 3505 3099.
 Rowdie Lang |
Rowdie has been a part of our Team since 2020. He has witnessed firsthand the ongoing evolution of the finance industry as technology continues to change the way customers' access financial services. He has a passion for helping people and relishes the opportunity to work alongside our teams every day as they help our customers financial dreams come true. |
