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Applications for personal loans can be daunting, sometimes there is so much to read and interpret. For this reason, many applicants make mistakes on their loan applications. Unfortunately, filling out an application incorrectly can result in your loan being rejected, regardless of how minuscule the error is. To better your chances of approval. Learn about the common mistakes made on personal loan applications and other ways you can increase your chances of approval.

Common Mistakes Made On A Personal Loan Application

Loan applications can be complicated and dull, no wonder mistakes happen! To better prepare for your next loan application with a personal loan lender. It can help to be aware of common mistakes so that you can avoid making them. Below is a list of mistakes commonly made on applications for financing.

Not Completing The Full Loan Application And Missing Documents

Before you submit your personal loan application, you should ensure that you answer all of the questions and complete the entire application. If you fail to provide a crucial piece of information to the lender, your application may be rejected or delayed.

Common Documents Required For A Personal Loan

Most lenders require the following documents to assess your creditworthiness and verify your identity and finances:

  • Personal identification – To verify your identity, your lender may require a government-issued photo ID. Such as a driver’s license, passport or health card.
  • Income documents – To verify your income, your lender will require documents. Such as your pay stubs, bank statements or tax receipts. Your lender may also require a letter from your employer detailing your income and employment status.
  • Other documents – Some lenders may also require a utility bill to verify your address and your social insurance number for credit checks. 

Not Providing Your Full Or Legal Name

Personal loan lenders use your full legal name to verify other information you’ve provided. For example, your full name as shown on the application should match the name on your bank account exactly. If your name doesn’t match the name linked to other information. The lender may not be able to verify your identity. Avoid using nicknames or other variations of your name on loan applications.

Failing To Meet The Minimum Requirements

Personal loan lenders typically provide a list of requirements you need to qualify for a loan. Before applying, check the list to ensure that you meet the minimum requirements, including the following: 

Credit Score 

Your credit history can heavily affect your ability to secure a loan. Depending on the lender, you may need good credit to get approved for a personal loan. A good credit score in Canada is typically between 660 to 724. If your score is less than 660, you may need to apply with an alternative online lender that caters to bad credit borrowers.

Before applying, find out exactly what score your lender requires to get approved for a personal loan. 


Your income should be high enough to cover all your current expenses, with plenty left over to make your new loan payments. The minimum income you need will depend on a variety of factors, such as the loan amount you’re applying for, your debt levels, your credit score, and the lender.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is another important metric that lenders use to assess borrowers and represents your monthly debt relative to your gross monthly income. Generally speaking, borrowers with a high DTI ratio will have a harder time keeping up with payments because of all the other bills they have to pay. 

Lenders typically avoid working with borrowers with DTI ratios over 43%. If you fail to meet the lender’s minimum DTI requirements, your loan application may be denied. Rather than wasting your time, find a lender with requirements you can meet, or take some time to reduce your DTI to meet these criteria. 

Using False or Incorrect Information

Lenders want to make sure that the information you provide on your loan application is completely accurate before extending credit. If you provide false or incorrect information, the lender will be unable to accurately verify your information, which means your application could be denied.

What Happens If Your Lie On A Loan Application?

You might be tempted to add a few extra thousand dollars to your income or shave off some of your debt load when applying for a loan in hopes of making yourself appear more financially sound. But this is a bad idea for several reasons.

  • Lenders Use Technology to Scan For Inaccuracies – Lenders have a lot of experience verifying information on loan applications and take many precautions before lending out thousands of dollars. Plus, they use innovative technology to detect potential inaccuracies and fraud, so it’s a lot easier for them to spot false information. The odds of your incorrect information going unnoticed are pretty slim. 
  • Legal Repercussions – If the information provided on your loan application is fraudulent, you could face serious consequences that may result in litigation. Lying on a loan application in an effort to obtain funding is considered fraud. If found guilty, you could be heavily fined or even jailed. Under the Criminal Code of Canada, anyone convicted of fraud over $5,000 can be punished by a jail term of up to 14 years. 

“Incorrect” Bank Account

Creditors use your bank account information for the initial loan deposit and future loan payments. What you may not know is they use your account information to confirm your income as well. If you provide a bank account that is not associated with your paycheque or income, the lender may conclude that you don’t have a reliable source of income.

Apply For Too Much Money

The amount you apply for should be reasonable for your financial circumstances and be enough to cover whatever you need the money for. Applying for too much money could communicate to the lender that you are high risk thereby leading to your application getting rejected.  

Borrow Up To $50,000


How To Improve Your Chances Of Getting Approved

Ensuring you fill out the loan application properly is one way of improving your chances of getting approved. Although, there are many other things you can do too. The following list is composed of ways you can better your chances of getting approved.

Check Your Credit Score Before Applying 

Your credit score is a major consideration for most lenders, particularly for personal loans. Before applying, look at your credit score and report. The first thing you should look for is errors, if you find one, reach out to the appropriate credit bureau to have the mistake corrected.

The higher your credit score is, the higher your chances of being approved for a personal loan. To help improve your credit scores, you can try the following: 

  • Pay your bills on time and in full in order to build a positive payment history. Your payment history can greatly impact your credit scores, as such ensuring you pay your bills on time and in full is crucial. 
  • Keep your debt-to-credit ratio low, preferably around 30%. You can do this by paying down your credit card and lines of credit. You can also achieve this by increasing your credit limits.

Add Another Source of Income

If you can, get a second source of income from a part-time job or side hustle. The higher your income, the better your chances of qualifying for a personal loan. In addition, your debt-to-income ratio will benefit from a second source of income, particularly if you use your extra cash to pay down existing debts.

Choose The Right Lender

Part of the loan application process is finding a lender that suits you best. Every individual has unique financial needs, your lender should fit those needs. You may have to spend some extra time researching lenders and financial products, but it will pay off in the long run.

Use A Cosigner

If your credit isn’t the best, you can use a cosigner to improve your chances of getting approved. The cosigner should have strong credit and high income as these factors will be assessed during the application process. Furthermore, your cosigner will be responsible for your payments is you can’t make them.

How To Get Approved For A Personal Loan 

To help you get approved for a personal loan, it’s best to understand the loan application process. 

1. Get Pre-Approved – One of the preliminary steps to applying for a personal loan application is getting pre-approved. You’ll need to fill out an application online with basic information about you and your finances.  The lender will use the information you provide to pre-approve you for a loan, which is why it’s essential that there are no inaccuracies on the application. Based on the data you provide, the lender will provide you with an estimate of the loan amount you can get approved for, along with the associated interest rate and fees. 

3. Provide Documents – If you’re satisfied with the offer and want to proceed with the loan, you’ll need to provide the lender with more detailed documentation to help them verify your identity and creditworthiness. 

4. Get Verified And Approved  – Once you submit your application, the lender will carefully assess it and verify all documents you provided. The lender will make a final decision about whether or not to approve your application.  

5. Sign And Get Funded – If approved, you’ll sign off on the contract, and the agreed-upon loan amount will be deposited into your account or sent via e-transfer. You will need to start making payments towards repaying the loan right away according to the terms of your loan contract.

Can I Get A Guaranteed Approval On My Personal Loan? 

Every now and then, a lender will guarantee approval. This means that you will be approved for the loan in question before the lender considers an application or follows a loan approval process. 

While this may sound great, beware of lenders that make such claims. No legitimate lender will guarantee approval without assessing a borrower in some way. Lenders have procedures in place to determine if a candidate is worthy to ensure that they don’t take on too much lending risk. 

Lenders who claim that they don’t use these processes are likely fraudulent or scams because no legitimate lender can afford not to rely on risk assessments of their candidates. If a lender says they guarantee approval, it is advised that you find another lender.

Bottom Line

When you’re applying for a loan, it’s important that you do your part for the best odds of getting approved. This means filling out applications completely and correctly as well as doing what you can to better your financial position. After all, you don’t want to get rejected for a loan due to a small mistake that could’ve been avoided.

Personal Loan Application FAQs

Does applying for a personal loan affect your credit score?

Most personal loan lenders will check your credit during the application process, this can make your credit scores drop by a few points for up to a year. 

Why was I rejected for a personal loan?

There are numerous reasons why you may have been rejected for a personal loan. Some of the most common reasons are poor credit, low income, high debt-to-income ratios and unstable employment. Lenders may also reject you for a personal loan if they’re unable to verify information on your loan application which can be caused by inaccurate information and/or missing documents. 

What is the easiest way to get approved for a personal loan?

The easiest and fastest way to get approved for a personal loan is by ensuring your credit and finances are in good shape. Ensuring your loan application includes all information and documents necessary to verify this information can also speed up your loan approval. 

What should I do if my personal loan application was rejected?

If your loan application is denied, your lender is required to provide an explanation. Carefully review the letter and find out why you were turned down and what you can do to rectify the situation.  For instance, if your credit score is too low, take steps to improve it. Or, if you carry too much debt, work towards paying it down to improve your debt-to-income ratio. Otherwise, consider reapplying with a co-signer added to the loan contract to increase your chances of loan approval. 
Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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