Bank statement loans are a type of loan that is based on a borrower’s bank statements rather than their tax returns or traditional income verification. These loans are typically offered to self-employed individuals, small business owners, or those who have non-traditional sources of income.
To qualify for a bank statement loan, borrowers must provide their bank statements from the previous 12 to 24 months. Lenders use these statements to calculate the borrower’s average monthly income and expenses, and then use this information to determine their ability to repay the loan.
Bank statement loans are typically easier to qualify for than traditional loans because they don’t require traditional income verification, which can be difficult for self-employed individuals or small business owners who have irregular or seasonal income. However, they also tend to come with higher interest rates and fees because they are considered riskier loans.
Who are bank statement loans for?
Bank statement loans are primarily designed for self-employed individuals, small business owners, and other people who have non-traditional sources of income. Traditional lenders often require a stable, regular income that can be easily verified with pay stubs or tax returns.
However, for those who have irregular or unpredictable income, such as freelance workers, independent contractors, or people who own their own business, it can be difficult to meet these requirements.
Bank statement loans can be a good option for these individuals because they are based on bank statements rather than traditional income verification. By looking at a borrower’s bank statements over a period of 12 to 24 months, lenders can get a better understanding of their average monthly income and expenses, which can help them determine their ability to repay the loan.
In addition to self-employed individuals and small business owners, bank statement loans may also be suitable for people who have recently started a new job, those who have experienced a recent drop in income, or those who have a high debt-to-income ratio.
However, borrowers should carefully consider the terms and fees of the loan before deciding to apply.
Overall, bank statement loans can be a good option for those who have non-traditional sources of income, but borrowers should carefully consider the terms and fees of the loan before deciding to apply.