credit

How To Improve Your Approval for Online Loans In Canada

There are times you need more money because of unexpected events. For example, someone close to you may get seriously ill and lack health insurance or extra funds for treatment; and because you care, you want to help. Or you may be involved in a car accident and need funds to fix your car right away. Whatever the cause, chances are you’ll end up needing more money than you have available to address an urgent matter.  

The good news is that it’s possible to get online loans in Canada to help you deal with that urgent event immediately. To improve your chances of getting approval for an online loan, we’ve put together useful tips you can follow.

Check Your Credit Score and Credit History

It’s certain that all borrowers have to look at their personal credit score and their related credit history first, before they get to borrow any money. A borrower who has a poor credit score and spotty credit history will have a harder time qualifying for a sizable new loan with favorable terms and conditions. You can expect your transactions for the current year to remain on file for another six years. But if you really have certain ‘hits’ in your credit history, you may have to work doubly hard to earn a favorable credit score.

If your credit score and your credit history are unattractive, you may only be able to qualify for poor credit loans. And, of course, your lender may charge you a high interest rate since they are taking a risk by lending to you.

Repay Older Loans First

It’s ideal to seek out a new lender only if you have repaid earlier debts first. If you have any unpaid debts, your payment history for those will be revealed through a credit check. This may hamper your efforts to get a favorable interest rate on new loans. It may even prevent you from applying at another lender for a new loan. Plus, your creditors may file a case against you if you leave previous loans unpaid past their due dates. A history of defaulting on earlier loans will only harm your chances of qualifying for better loans.

Improve Approval Odds by Applying Only At Reputable Lenders

If you have been able to improve your credit score, your next task is to track down a lender with a good reputation of issuing online loans at favorable rates. Ask people in your social circles about it, especially those that you’re very familiar with. Someone you know may have applied for an online loan in Canada before. Ask them if they had a good experience when they borrowed from that lender. But, even if they give you a good reference, don’t go with the very first name they give you. 

At the very least, you should have around five lenders in mind before you go online to do research about them. That way, you won’t hit a wall if you discover the lender you had in mind isn’t a good fit for your needs—you can simply move on to the next one on your short list.

Look For Online Reviews About Lenders On Your Short List

Since you now have a short list of names to borrow from, it’s ideal to look for reviews first. Reviews will tell you whether a lender is trustworthy and worth contacting. 

Don’t rely solely on reviews from the lenders’ websites. Instead, try to find objective third-party reviews. This will tell you whether a lender’s reviews on their website are accurate and help you make an informed decision about which lender to choose. 

As you research the lenders on your short list, you might even discover other lenders worth checking out, so keep an open mind while doing this.

See If The Lender Offers Loans To Poor Credit Borrowers

After your research, you’ll probably have fewer names on your short list—perhaps just one. For those who still have a bad credit score, which is 650 and below, it’s time to see if your choice of lender will help you. 

The good news is that many lenders will still consider your loan application, even if you have a bad credit score. In that case, there’ll probably be some terms and conditions because of your credit status, but it won’t be unreasonable. If they’re willing to help you, you must carefully read their terms for approving a bad credit loan and make sure you understand your own and their obligations in this regard.

Scrutinize The Lender’s Website For Possible Red Flags

There are some ways you can tell if a lender will be too risky to borrow from, including:

  • They guarantee that they’ll approve your loan application.
  • They don’t ask for any background information.
  • They insist on valuable collateral.
  • They require the first repayment installation before granting your loan.
  • They don’t display their accreditation status on their website.

Don’t pursue the transaction if you spot these red flags on a lender’s website. It’s better to play it safe.

Undergo Scrutiny When The Lender Does Due Diligence

Naturally, you can expect the lender to do their due diligence. They’ll want to verify your identity and do a background check before they grant you a loan; this is true even for easy payday loans online. Since you already fixed your credit score and credit history (as previously suggested), this part should be easy for you.

To improve your chances of getting approval for a loan, pay attention to the following:

    • Be Thorough In Filling Out The Loan Application Form: make sure there are zero inconsistencies. 
    • Submit Proof That You Are Employed and Earn A Regular Income: the lender may ask if your income meets their minimum requirements. Your income level will dictate how much you can afford to pay the lender monthly. The length of time you have been employed at your current employer may be important, too.
    • Explain to The Lender Why You Need a Quick Loan: it’s important to be upfront about the reason for your emergency loan application. It may hinder your loan approval if you refrain from informing the lender about the real reason you need the loan.
  • Offer Character References. 
  • Submit Valid Bank Account Details.

Having the above in place may convince the lender that you’re a good risk. A borrower who’s a good risk may be granted a lower interest rate.

Consider Applying For A Guarantor Loan

If you have a poor credit score, one way to increase the odds of your loan application being approved is to apply for a ‘guarantor loan.’ This benefits someone with a poor credit score because your guarantor has a good credit history and agrees to be your co-borrower for the loan.

As you repay a guarantor loan, you’ll actually be rebuilding your credit history with each payment. Eventually, you’ll be done paying for that loan and may even qualify to get a good credit loan by yourself the next time.

Refrain From Applying For Multiple Loans

If you have a great credit score but need a quick loan, it’s generally not a good idea to apply for loans from different lenders. Yes, you may qualify, but every loan application counts as an inquiry in your credit history. This means you might get rejected for any one of them, or maybe all of them, if all the lenders do a credit check on you.

Borrow only what you need to cover your emergency. Then make sure your income is sufficient to pay back the lender.

Rebuild A Positive Credit History To Ensure Approved Loans

You already know that having a poor credit score will affect your chances of qualifying for better online loans in Canada. Rebuild a good credit score so that you can qualify for the good credit loans. If you gain access to good credit loans, you will be offered better interest rates and may even get to borrow bigger amounts of cash.

Here are other ways you can rebuild your credit score:

  • Check Your Credit History Every Year: your credit history is available from the two Canadian credit bureaus, namely, Equifax and TransUnion. Lenders will usually want to see a good credit history before they release a sizable loan to anyone. You can check your credit history at least once a year. This will keep you informed as to whether you have a poor credit score and why that happened.
  • Punctuality Counts: paying your debts on time is another thing a lender will look for. If you have a history of missing due dates and falling behind on payments, that’ll hurt your credit score, too. This is why you’ll have to refrain from taking on too much debt. If you can’t pay the full amount yet, try to pay just the minimum before the due date. If you are able to keep up with due dates for payments, lenders will notice that and you’ll qualify for better interest rates on future loans.
  • Be Patient: lenders are basically looking for borrowers who have good borrowing and spending habits. This means being able to live within your means by staying within the limits of your budget. Make a budget after each payday that factors in debt payments too. You need to be patient with yourself because it takes time to rebuild a good credit history. If you’re able to make this a habit, you won’t need to take on risks such as applying for too much debt, because you’ll have enough cash to pay for what you need and owe.
  • Educate Yourself: if you’ve done what you can to rebuild your credit history, take note of the types of online loans you may qualify for in Canada. Also, don’t fall for untrustworthy online loan websites that will either ask for money upfront or charge very high interest rates. Rather, look for the online lenders who are reputable and fair, especially with the interest rates they charge.

Final Word

Getting approval for online loans in Canada isn’t hard. By following the guidelines discussed in this article, your chances of getting a loan will definitely improve.

Remember to research possible lenders to make sure they’re trustworthy. And when you apply, give the lender as much information as possible to help them process the application fast. All lenders want to help those with a good credit score, so make that your goal.

About the author

Rachel Slifka

Leave a Comment