Overview
Lenders use a variety of criteria to help them determine whether an applicant will be able to repay a loan. The criteria they use typically provide them with a picture of the credit risk presented by an applicant, their likelihood of defaulting on their payments, and so on. Therefore, the most common reasons why a loan application might get rejected in Canada typically have to do with failing the lender’s credit risk assessment in one way or another.
Reason #1: Not Meeting Eligibility Requirements
Make sure you meet the lender’s requirements. Typically, these may include:
- You must be at least 18 years of age.
- You must be a Canadian citizen or permanent resident.
- You must have a stable source of income.
- You must have a permanent address.
- You must have a valid Canadian bank account, which has been active for at least 90 days.
Adhering to these basic requirements will ensure that your loan application doesn’t get filtered out straight out of the gate.
Reason #2: Too Many Ongoing/Active Payday Loans/Short-Term Loans
If you’re already juggling multiple payday loans/short-term loans, taking on an additional loan may overextend your financial capacity. Therefore, it’s important to minimize your current number of ongoing/active payday loans and short-term loans prior to applying for a loan. Lenders may view an excessive number of ongoing loans as indicative that you are overextended and overburdened with existing financial obligations.
Reason #3: Unstable Income
In the absence of a stable income, you are unlikely to meet your repayment obligations. Therefore, the income requirement is typically prevalent across all lenders. Make sure you are able to provide proof of a consistent source of income when you apply for a loan with any lender. Here at Friendly Lender, we use advanced encryption technology to keep your personal information safe and secure.
Reason #4: Too Many NSF Transactions
A non-sufficient funds (NSF) transaction refers to an instance when a bank account does not have enough funds to cover a payment or a transaction that has been attempted. NSF transactions indicate a lack of financial stability. Frequent NSF transactions, along with the associated NSF fees charged by banks, may prevent you from meeting your repayment obligations and are viewed as indicative of a high credit risk. For more information on NSF transactions and fees and tips on avoiding them, refer to this article by Investopedia.
Reason #5: Incomplete or Inaccurate Information on Your Application
If you do not provide a complete application, your loan will not get funded. Similarly, if you provide false or inaccurate information on your application, your chances of approval will be low. Make sure you provide complete and valid information on your application. This will give you your best chance of approval.
Reason #6: Recent Bankruptcy or Foreclosure
A recent history of bankruptcy or foreclosure indicates a lack of financial stability and an inability to take on additional financial obligations. The absence of such a history may present you as a more reliable borrower to most lenders. Therefore, make sure you adhere to the expectations a given lender may have regarding such a financial history.
How to Avoid Getting Rejected for a Loan
To avoid having a loan application rejected, use the following tips:
- Make sure you meet the eligibility requirements.
- Make sure you have few or no NSF transactions.
- Provide full and valid information on your application.
- Minimize your number of active/ongoing payday loans and short-term loans.
Following these tips will optimize your chances of approval!
The Bottom Line
Lenders evaluate applications for the applicants’ likely ability to repay their loans. Make sure you meet the eligibility requirements and provide full and complete information on your application. Follow additional tips like minimizing your NSF transactions to maximize your odds of approval.
If you need to cover urgent expenses, apply for a personal loan online via Friendly Lender. We don’t check your credit score or credit report during our simple and quick online application process. While we don’t check your credit score or credit report, you may wish to take control of your credit score with the help of Credit Verify! This sophisticated technology allows you to monitor your credit score and automatically detect any mistakes on your credit report. Sign up now!
