Nobody is immune from making mistakes or finding themselves in a disastrous financial situation that affects their credit rating. But what impact does the score have on the decisions of lending institutions when you want to borrow? Can you get a personal loan with bad credit?
Avoid traditional institutions
To grant a personal loan and—more generally—all types of loans, conventional banks study the applicant’s indebtedness and the stability of their situation, but they also consult their credit report and take their rating into account. In other words, if your score is bad, it’s pointless to go to the counter of a traditional institution, even if you have held an open account there for years, because your application will be denied.
No credit check loans
The alternative involves turning to lenders who grant loans without a credit check. In return, they verify that the applicant has a stable situation, a regular income, that they manage their finances properly, and that the act of taking out this new loan doesn’t put them into over-indebtedness. In addition, they still need to meet certain conditions to obtain this type of loan.
The criteria to fulfill
Generally, in Québec, personal loans with no credit check are granted to borrowers:
- Who demonstrate a full-time job for more than six months
- Who have resided at the same address for at least six months
- Who have a minimum monthly income of $1,200 paid by direct deposit or cheque
- Who have had an open bank account in Québec for more than six months
- Who are not subject to wage garnishment or bankruptcy proceedings
While it is often easier for an employee to be accepted, most institutions examine the files of self-employed workers; disability insurance program, CSST, and pension plan beneficiaries; and people on maternity or parental leave. Generally speaking, loans are also granted to them if the other conditions are fulfilled.
The documents to provide
In addition to the basic criteria, the lending institution examines the applicant’s account statements to give a final approval. Indeed, before granting a loan, they want to verify:
- The identity of the borrower by requesting two pieces of identification
- The amount and regularity of the pay with several pay stubs
- The residential address by requiring a bill
- That the latest bank account statements don’t show multiple NSF payments, which could be considered proof of poor management or a situation of over-indebtedness
- What outstanding loans the borrower has to repay.
In addition, if you have just bounced a cheque or if you have outstanding microloans to repay, it is preferable to defer your application for 3 months and present a healthier no credit check loan file—in other words, with bank statements on which no payment incidents or microloan repayments appear.
While it is virtually impossible to obtain even the smallest loan at a conventional bank with bad credit, you can still get a personal loan without a credit check from a specialized institution as long as you meet the criteria: demonstrate a stable situation and income, carefully manage your finances, and be able to repay this new loan—in other words, not be in a situation of over-indebtedness.