If you don’t have a bank account, you’re not alone. According to a 2021 report by the Canadian Prepaid Payments Organization (CPPO), 10 to 20 million Canadians are either underbanked or unbanked. This means that these individuals do not have access to common banking services and products.
If you (or someone you know) currently do not have access to a bank account then you might be wondering if you can still apply for a loan.
Yes, Canadian consumers without bank accounts can still apply for certain types of loans, sometimes referred to as no bank verification loans. But, it’s important to understand that options will be limited and typically more expensive than loans from traditional financial institutions.
As the name suggests, a no bank verification loan is a type of loan that requires no documentation to be verified by the lender. Essentially, you can get a loan without having to provide any documentation regarding your finances, assets, or bank account.
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Without a bank account, there are only a couple of loan options available to you. These options should only be considered in emergency situations as they are expensive and can cause financial hardship if you are unable to pay them back.
Certain pawn shops offer loans to consumers who provide a valuable item as collateral. The shop keeps the item until you are able to pay off the loan plus interest. Pawn shop loans are typically small, around $150, and expensive. Interest rates can be 100% or more. Furthermore, if you default on the loan the shop has the right to sell your item and likely will do so.
Payday loans tend to be pretty popular for situations like these. Such short-term loans are typically made for no more than $1,000 to $1,500 and provide much-needed funds within a very short period of time. In fact, borrowers can get their hands on the money within as little as 24 hours.
If you don’t have a bank account, you will need to look for a payday lender that will fund the loan via cash or prepaid card.
Certain lenders offer debit card loans. This is where funds are loaded onto a prepaid debit card and mailed to you or can be picked up in person. If you take out a debit card loan from a payday lender, you will have to repay the loan by your next payday with cash. If you take out a debit card loan from another type of lender, you may still need to have a bank account where they can withdraw your payments from.
What if you have bad credit or no credit, but don’t want your lender to pull your credit? In that case, you’ll have to provide your bank statements to your lender.
Lenders typically do not want to loan out money that they believe might not be paid back. They will still want some assurance that the loan will be repaid, especially when they are dealing with unsecured loans; that is, loans that do not come with any collateral for lenders to recoup should borrowers default on their loans.
In order to protect themselves, lenders will typically either want to see specific financial documentation verifying the ability for borrowers to repay the loans they take out or will pull a credit report. The information contained in a credit report will outline a borrower’s payment history and credit utilization. Such information is valuable for lenders to assess a borrower’s ability to repay a loan.
A no bank verification loan may sound great, but like everything else in life, there are some drawbacks. Here we’ve listed both the pros and cons so that you may make an informed decision.
Having your own bank account will not only make it easier to apply for loans but will make all aspects of your financial life more convenient.
A no bank verification or no bank account loan is certainly an option that is available for you whenever you need quick cash to cover a pressing expense. However, you should be aware that these loans are expensive and may cause more harm than good. Take the time to consider your options before taking on any type of financial commitment, whether small or large.
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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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