How Bank Statements Affect Car Loans

Filed under Information Centre

Bank statements can significantly affect the outcome of car loans. In fact, sometimes an approval or decline can boil down to bank statements.

If you’re planning to apply for a car loan or another finance product, make sure that your bank statements reflect a positive cash flow. Here’s how and why.

The gist in 30 seconds

  • Bank statements affect car loans in many different ways as they give insight to an applicant’s money management
  • Typically lenders request 3 months of bank statements but can require more
  • Cash withdrawals, irregular deposits and frivolous spending can affect a car loan outcome
  • Cash overdraft, an account in the red, can cause problems
  • There are multiple things you can do to polish your bank statements

Bank statements explained

A bank statement is a record of all the transactions made in your bank account, including deposits, withdrawals, cash transfers and debit card payments. They also contain other financial information, such as your cash balance, payments, interest earned, and bank service fees and penalties.

Bank statements are often required in the loan application process to help lenders assess your banking stability and repayment capability. It does not only show your financial position but also reflects your spending habits and how you manage your cash flow.

What lenders look for in bank statements

Bank statements affect car loans because lending institutions (eg. banks) want to make sure that their clients have surplus income to repay the loan.

Typically lenders request 3 months of bank statements.

Some people think lenders scrutinise bank statements to knock out people who are bad with budgeting but this isn’t the case.

Lenders want to make sure that their clients can live the lifestyle they have as well as making loan repayments.

For example, if an applicant spends a significant amount of money on eating out, but will have to reduce this if they take out a car loan, it can cause issues. That’s depending on the applicant’s surplus income of course.

Cash Balance

A positive cash balance means that you have money available in your bank account. It tells lenders that you’re managing your cash flow well.

On the other hand, a negative cash balance suggests that you struggle with your finances.

The ideal amount of cash balance required by lenders usually depends on the loan amount you requested.


Regular deposits to your bank account suggest that you have a steady income and are likely to make on-time repayments.

If you own a business, lenders are likely to deduce that it is operating profitably and that there's a steady stream of revenue from continuous sales.

Irregular large deposits and one or two big deposits right before applying for a loan are questionable. An applicant would likely have to explain where these funds come from, for example, they might be gifted by a family member.

Lenders occasionally disregard lump-sum deposits and may only consider the remainder of your income as applicable in the assessment of a loan application.

In other words, it’s a case-by-case situation.


Avoid making huge withdrawals in the lead up to applying for a loan. Frequent withdrawals, especially of the same amount from your bank account, may suggest that you are paying an undisclosed loan, credit card debt or any other debt that requires you to make regular payments.

Cash withdrawals in bank statements affect car loans because lenders can’t see where the funds are going and why.

Try to avoid cash withdrawals in the lead up to applying for finance.

The same can sometimes be said for cash transfers. Many people transfer funds to and from family and friends which is totally normal - the issue can be frequency and description.

If you’re sending money to someone regularly, it might come across as a private loan which could reduce your ability to repay another loan from a lender.

If you do send money to someone, make sure the description is clear and professional.

Cash overdraft

A cash overdraft is a bank account that contains a negative balance. It can be caused by automatic deductions with insufficient funds.

For example, if someone’s bank account has only a few dollars in it and a streaming service subscription is due, it’ll go into the negatives.

This is recorded in bank statements and is typically a red flag for lenders because it can indicate an applicant is struggling with repayments and money management.

If you have an overdraft in your bank statement, you might need to explain how it happened and provide any supporting documentation if required.


Your bank statement is just one of the many factors that lenders look into when evaluating your loan application, but it can tell a lot about you and your financial circumstance.

It is wise to maintain a clean bank statement with a positive cash balance, regular deposits and no overdraft several months prior to your loan application.

Here are a few bank statement tips in the lead up to getting a loan

  • Minimise frivolous spending, especially gambling and nights out
  • Try to avoid cash withdrawals or poorly labelled transfers to friends and family
  • Avoid/minimise subscriptions that are regular deductions, for example gym memberships and streaming services
  • Keep your account out of the negatives
  • If you have existing loans, do not miss any repayments
  • Clearly note, record and keep any paperwork of any large deposits or withdrawals

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