Receiving loan denial letters frustrates Canadians hoping to finance major expenses like vehicles, homes, education, or business ventures with borrowed funds. Unfortunately, lenders decline millions of applications each year. Understanding the reasons behind your particular rejection provides a roadmap to improve your situation and approval odds moving forward.
Ask for Specific Loan Denial Reasons
Don’t assume reasons your application got rejected. Ask the lender to provide the specific credit factors that led to their decision in writing. All lenders must disclose reasons per the Equal Credit Opportunity Act.
Common reasons include high debt, low credit scores, limited income, or insufficient credit history. Knowing the causes allows you to directly address them before reapplying.
Review Your Credit Reports and Scores
Immediately obtain free copies of your credit reports from Equifax and TransUnion after loan denial. Review all information for inaccuracies negatively impacting your score. Errors could include late payments, unknown collections, or personal data issues.
Dispute any mistakes with the credit bureaus and potentially raise your score. Even marginal score improvements expand loan options available.
Assess Areas That Need Work
Along with your credit reports, examine your current scores from Equifax and TransUnion. Most lenders have minimum score thresholds. If your scores fall below those levels, employing techniques to start raising them over 3-6 months improves your chances before reapplying.
Helpful credit score boosting tips include making monthly payments on time, lowering credit utilization below 30%, and limiting new credit inquiries while rebuilding your profile and dealing with loan denial.
Prepare Your Financial Documentation
Submitting a complete, well-documented application after loan denial demonstrates your commitment. Have pay stubs, tax returns, bank statements, and any other paperwork the lender requires organized and ready to send again. Avoid scrambling to find documents upon reapplication.
Add a Creditworthy Co-signer
Asking a co-signer with higher income and better credit scores than you to apply alongside you strengthens the overall application after loan denial. The co-signer agrees to repay the debt if you default. Approval usually requires just one applicant to have strong credit.
Make a Large Down Payment
While tempting, avoid applying for 100% financing just because it is available. Providing a down payment of 20-30% signals the lender your financial dedication to repaying the loan and improves approval odds.
Making a substantial down payment not only builds trust with your lender but also reduces your monthly installments. This step showcases your ability to save and plan financially, painting you in a favorable light. Moreover, a larger down payment means you’ll pay less interest over the loan’s term, saving you money in the long run. It’s a win-win move for both your financial stability and your rapport with lending institutions.
Contact Your Bank or Credit Union
For your next try after a loan denial, consider applying through your current financial institution where you already have an established relationship and accounts in good standing. Existing customers often get more lenient treatment than unknown applicants.
Credit unions in particular may offer better approval odds and interest rates to members. Developing rapport improves your chances versus applying anonymously online.
Apply with Multiple Lenders
Each lender evaluates applicants differently based on unique underwriting formulas. One that declined you may approve a strengthened application on your next attempt. Cast a wide net and compare multiple quotes rather than relying on a single company.
Persistence and correcting weaknesses sets you up for success on your next loan application after loan denial. Let us help you get there.
We Can Get You Approved
The finance experts at Get Approved Canada have decades of experience guiding clients after loan denial, through credit improvement, smart loan selection, document preparation, and strategic reapplication to achieve approval quickly. Don’t let past loan denials stop you.