Short-term borrowing is a solution that lets you deal with emergency situations or difficult month-ends. And when you have a bad credit rating, the only possible option often involves filing a loan application with no credit check. Here are three tips for doing this successfully.
1. Meet the basic criteria
Only some people who don’t have access to traditional loans are eligible for loans with no credit check. Generally speaking, lending institutions approve borrowers who:
- Are 18 years of age or older
- Have had a full-time job for at least six months. In some circumstances, self-employed workers, beneficiaries of CSST programs, disability insurance, or pension plans, or people on maternity or parental leave may be approved.
- Receive an average net income of at least $1,200 per month
- Use a Canadian bank account that has been open for at least three months
- Have resided at the same address for more than six months
- Are paid by direct deposit or cheque
- Are not bankrupt
- Are not subject to wage garnishment
- Are not in the process of voluntary deposit.
2. Provide the requested information and documents
Although taking out a loan with no credit check is easier than taking out a traditional loan, you still need to fill out a form and provide all the requested information and documents for verification purposes, including:
- One or two pieces of ID
- Proof of social insurance number
- Proof of residence (internet or Hydro-Québec bill, etc.)
- One to two pay stubs
- Bank statements for the past two to three months
- A voided cheque.
3. Prove your solvency
Once all the requested information and documents have been provided and the basic criteria have been fulfilled, you still need to convince the lender that your financial situation can support additional financing. Because while the agency doesn’t require a credit check to approve the loan application, they will still verify that you will be able to repay this new loan through another form of evaluation.
Most lenders who don’t take your credit rating into account require you to provide them with bank statements to check the amounts of money that you receive monthly in your bank account, as well as the regularity of the payments. They also use this opportunity to check if you already have too many financial liabilities and – if applicable – refuse to approve a new loan if they determine that your level of short-term indebtedness is too high.
Lending agencies are also looking for the potential presence of other current loans on your bank statements, especially microloans, as well as NSF payments. Each lender has their own policy, but generally speaking, loan applications from clients who already have two current microloans or who have been subject to several NSF payments over the last few months will be rejected.
Only if the file is complete and all the criteria have been fulfilled can the loan application with no credit check succeed. In certain specific cases, such as self-employed workers, beneficiaries of CSST programs, disability insurance, or pension plans, or people on maternity or parental leave, the approval of the application is subject to an in-depth study of the file, which usually requires additional time.