What Are the Eligibility Requirements for a Personal Loan?

Date posted: Sept. 10, 2015

A personal loan is an excellent way to obtain a lump sum of money for large purchases, home renovations, debt consolidation, vacations, education, and more. In Canada, you must be at least 18 years of age to qualify. Below, you will find the rest of the major eligibility requirements for getting a personal loan.

ID and Proof of Canadian Residency

An ID and proof of residency are required for obtaining any kind of loan in Canada. Banks and financiers want to know whom they are loaning to. A photo ID, driver's license, or passport is usually required, though some institutions may accept a school or work photo ID. Proof of residency consists of a utility bill or other piece of official mail delivered and marked by Canada Post. This shows the lender that you live at the address you claim on your application. Sometimes, if your postal address and the address on your ID do not match, you will need to update your ID before getting a loan.

Access to Your Credit Report

You will need to provide information that allows the lender access to your credit report, as well. Regardless of your credit – whether it is excellent, fair, or bad – the lender will want your credit score in order to determine the risks involved with lending to you. Most of the time, lenders will require your SIN number. There may be alternative routes for checking your credit, but this is typically the most common.

A Co-Signer or Collateral in Some Cases

If you have bad credit, or even a credit score that is on the lower end of the "fair" rating, you may need to provide collateral or present a co-signer for your loan. Collateral may be your car, an expensive piece of jewelry, or anything else of value that the lender will hold until you have paid your balance in full. If you default on your loan, the lender takes ownership of your property and may sell it to recoup their money. If you cannot provide collateral, a co-signer is another option. Essentially, someone who has good credit can sign the loan documentation and assume responsibility for repayment in the event that you default.

Verification of Employment, Income, and Expenditures

Finally, your lender will ask you to verify information like your employment, your income, and various expenditures such as rent, mortgage payments, utilities, food costs, and more. This way, they can determine the amount of disposable income you have each month and consider this in their lending decisions. Lenders will not ask you to repay more than you can afford each month, so it is essential for them to compare your income to your monthly expenses in order to mitigate their risks – and this helps you, too, since you know you can fit their terms into your budget.

The requirements for obtaining a personal loan are not difficult to meet. Be certain to gather all of this information and take it with you if you apply in person with your bank, credit union, or other financier. This makes the process a smooth one, and it may help you get the money you need quickly.

Check out more related content:

Should You Build an Emergency Fund or Pay Off Debt?

Published on: Oct. 21, 2016

Continue reading

Money Minute - What if a Creditor Calls

Published on: Oct. 19, 2016

Watch video

How To Start Over After Losing Your Job

Published on: Oct. 14, 2016

Continue reading