A Canadian personal loan could be the ideal solution for your financial needs. However, you might discover some lenders won’t grant you a loan. Obviously, this can be very upsetting, especially if you know that you have the resources to repay your loan.
Let’s look at some of the most common reasons lenders might deny you credit and your options for getting beyond them.
Does the Lender Require a Minimum Credit Score?
Traditional lenders often set a minimum credit score level before they’ll consider your application. They’ll run your credit report through one or both of Canada’s credit reporting agencies to see if you meet this requirement.
The credit score minimum can vary between lenders, but some lenders don’t have a minimum at all. If you’ve been turned down by one lender or you’re concerned that you don’t have pristine credit, try a lender that does not have a minimum credit score requirement.
These lenders use their own criteria to determine whether you are credit worthy. This normally includes a review of your income over the past three months through your bank. If you demonstrate you have the means to repay, you definitely have a chance at qualifying for a Canadian personal loan.
Do They Perform a Hard Credit Check?
Many people don’t realize that lenders can check your credit file in two ways: hard credit check or soft credit check.
Generally, most mainstream lenders perform a hard credit check when you apply for a Canadian personal loan. This appears on your credit file, even if you decide not to borrow through the lender or they turn you down.
While this may not seem like it is an issue, it can be if you try to apply through other lenders. Every hard credit check negatively impacts your credit score slightly. If you apply through multiple lenders, it can have a significant impact. It may also make lenders more reluctant to grant you credit, since it may appear you are trying to take on too much debt.
Fortunately, a good non-traditional lender uses the pre-approval process. This involves a soft credit check that does not appear on your credit file. Your Canadian personal loan will only appear on your credit file after you agree to accept the lender’s terms and sign your loan documents.
Does the Lender Want Proof of Your Income?
This can be particularly annoying for self-employed individuals. Mainstream banks usually want a statement of income from an accountant, which comes at a cost.
Others need to dig out their old pay stubs or pension records to start the application process. The worst part is that after all this fuss, there’s no guarantee you will qualify for a Canadian personal loan.
Once again, non-traditional lenders could be your solution. A good lender doesn’t ask for proof of income. Instead, they securely verify your income through your bank.
Don’t worry, they can’t peer into your personal affairs. They’re just looking to verify the income information you provided in your application.
Do You Need to Earn a Certain Income?
Traditional lenders usually want the reassurance of a big, regular pay cheque to ensure you’ll meet your loan obligations. Unfortunately, many people don’t earn high incomes.
Most work at a regular job, earn self-employed income, or even draw a pension. This can automatically eliminate a large percentage of people from the Canadian personal loan qualifying process.
Fortunately, non-traditional lenders often have less stringent income requirements. If you earn $2,000 per month, chances are you can qualify for a Canadian personal loan.
Have You Moved, Changed Jobs, or Changed Banks?
Mainstream banks want to see long-term stability when they review your Canadian personal loan application. This can mean that you could be turned down for a loan, even if things changed for a very good reason.
For instance, you may have moved to get a better job. You may have accepted a new position with a company in the same city, but you now earn more money. You may have changed banks since you didn’t like their fees or your new bank is simply more convenient.
Unfortunately, any of these changes can throw up red flags for traditional lenders. Fortunately, some lenders are happy to consider your application if you can show a stable history over the past three months.
Are You Carrying Too Much Debt?
All lenders look at your debt-to-income ratio (DTI) to determine whether there’s room for another loan. This measures how much you owe against how much you earn.
For instance, you might earn $2,000 per month, but your rent, car loan, and credit payments are $1,000. This means your debt-to-income ratio is 50 percent ($1,000/$2,000=.50).
While you may think you still have plenty of money to play with even after you pay your bills, lenders don’t look at it that way. They consider a manageable DTI is between 37 and 40, but even less is better.
Before you apply for any Canadian personal loan, calculate your DTI. Otherwise, lenders will probably reject your application. You can lower your ratio by paying down debt or minimizing your expenses.
Do You Meet The Eligibility Criteria?
Besides your income, debt, and stability requirements, lenders often have other criteria you will need to meet. The problem is that mainstream lenders don’t tell you upfront what they want from you. Just look at the websites of the big banks. Do you see their requirements in black and white? Nope.
You must either visit them in-person to fill out an application or apply online without any prior information. They will ask for detailed information such as your age, residency, address, email address, telephone number, work history, Social Insurance Number, and more. You provide all this and they tell you nothing.
Even if you ask them, they will tell you that they need to review your application. Then you sit and wait to hear from them, hoping you’ll be approved.
Luckily, a good non-traditional lender doesn’t operate this way. They tell you what criteria you need to meet to consider your application. It isn’t a guarantee of approval, but it certainly is a better way to avoid wasting your valuable time.
Borrowing from a Non-Traditional Lender
Non-traditional or alternative lenders are a good option for those who need more options. However, choose your lender wisely. Some are licensed and well-regulated, well others can do as they please.
A reputable non-traditional lender offers transparency, good customer service options, and government oversight. They must follow Canadian personal loan legislation and the specific rules for your region.
Borrowing from a non-traditional lender can also mean no, or lower setup and ongoing fees when compared to mainstream banks. They can make quicker decisions and release funds faster too. Plus, non-traditional lenders often operate online, 24/7. The entire process, including signing your loan documents is digital, blazingly fast, simple, and convenient.
A Canadian Personal Loan Through FlexMoney
FlexMoney wants you to understand what we expect from you. Here are our criteria for a Canadian personal loan:
- Earn a net income of $2,000, or more, each month, and have earned this for at least the last three months. This income excludes payments made through Employment Insurance, the Disability Tax Credit, and COVID-19 benefits. We will consider income from self-employment and pensions.
- Have an open and active Canadian bank account with at least three months of transactions
- Canadian citizen who is at least 20 years of age
- Have a valid email address and mobile phone number
- Not involved in an active bankruptcy, consumer proposal, or credit counselling program.
Here’s what we can offer you:
- Simple process – we’re 100% online
- Canadian company – our customer service representatives live and work here
- Licensed lender in Ontario, British Columbia, Alberta, New Brunswick, Nova Scotia, and Newfoundland
- Artificial intelligence assessment with less emphasis on your credit file
- Pre-approval process using a soft inquiry
- Multiple payment options & terms between 6 months and 5 years
- Loans from $500 and $15,000
- No set up or ongoing fees
- Competitive interest rates
- Fast decision & funds release
- Outstanding customer service via our toll-free number, website, or email
Find Out More
If you’re interested in starting the application process for a Canadian personal loan, or if you have more questions, please visit our website. We make it easier for you to get the Canadian personal loan you need now.