If you ever decide to apply for a loan from a bank, the loan officer will probably ask you to fill out a financial statement. A financial statement is a document that tells the bank a lot about your financial situation, and banks generally require this for all types of loans. If you have never heard of this and don't understand what it is or why the bank wants it, here are several things you should know.
The Purpose of a Personal Financial Statement
Banks require personal financial statements for a variety of reasons, but the primary purpose is to find out where you stand financially. A financial statement provides a snapshot of a person's financial position on the date he or she completed the form. Businesses create financial statements every month, quarter, and year for the same purpose. Individuals often create these on their own to see where they stand financially. A bank uses this document as part of the application process for any loan.
How a Financial Statement Works
When you get this document, you should notice that it has two main sections. The first section is your assets. You must list every asset you own, along with the current value of the item. For example, if you own a house, you should list the home at its present worth. At this point, it does not matter how much you owe on the house. You list it on the statement for its current value. You must do this with every asset you own, whether you have a loan on the item or not.
The next section is for liabilities. A liability is another word for debts. In this section, you will list every debt you have. If you own a house and have a mortgage on it, you'll need to list the current balance on your loan.
When you finish listing all your assets, add them up to get a total. Next, do the same thing with your debts.
The final step is to subtract the debts you owe from the assets you own. The answer you calculate indicates your net worth. Net worth is the equity you currently have when you compare your assets to your debts.
Filling out a financial statement is not difficult to do, but it may take some time. If you have questions about it or want to apply for a loan, talk to a loan officer at a bank today.
To learn more, contact a resource like CommunityBank of Texas.
When you start thinking more seriously about how to manage your finances, it is worth saying how important it is to find the perfect loan. While the right loan could help you to pay down debt without worrying a lot about the repercussions, the fact of the matter is that some people don't research loans as extensively as they should, causing problems. The purpose of this blog is to find great loans that could help you along the way. Check out these posts that talk about everything from narrowing down loans to identifying ways to identify lower interest rates. Check out this information to make sure you have what you need.