Why Is My Lender Asking For a Personal Reference?

Why Is My Lender Asking For a Personal Reference?

Written by Chrissy Kapralos
Fact-checked by Caitlin Wood
Last Updated August 24, 2022

Whether it’s an employer, landlord, or lender, there will be multiple instances in life where your character will be put to the test through a reference request. Unfortunately, your word isn’t always enough to convince an employer that you’re good at a particular job or a landlord that you’ll pay rent on time. Furthermore, lenders often rely on personal references to verify information about you as a consumer and access your trustworthiness as a borrower.

What is a Personal Reference?

A personal reference, also known as a character reference, offers insight into your character. A reference is requested to verify that information you have presented is correct. You may appear to be a decent person, who would pay back a loan, pay your rent on time, or fulfil your employment duties to the best of your ability. However, surface-level assumptions aren’t always enough to build trust, this is why personal references are often so important for certain financial transactions. 

Who Can be a Personal Reference? 

There are usually a wide array of options you can choose from when deciding who to use as your personal reference. Here are a few suggestions:

Family Members: A member of your family who doesn’t live with you is preferable, like a brother, sister, or parent. Keep in mind that if you’re providing a personal reference for a job, a member is not the best option. 

Friends: Close friends that you encounter frequently are good options for character references. 

Co-workers or Bosses: Workplace references are great choices because they can verify your career and income, as well as your dependability as an employee. 

When Are Personal References Required? 

Personal references are required in many life scenarios. When interviewing for a job, applying for a rental apartment, applying for a business loan from a bank or another type of loan from an alternative lender, you will often be required to provide a personal reference. 


Employers often request professional references to verify your work experience. However, sometimes they look for character references either from your previous employer or from a friend or past colleague. 


Landlords often request references from your previous landlord to ensure you have a good history of paying rent. They may also ask for personal references from a friend or family member to learn about your trustworthiness as well. 

Alternative Lenders

Chances are, if you are going to an alternative lender, you may not have a great credit score or a long history of income. Although alternative lenders are known for working with those factors (at the price of a higher interest rate!), they still will want to verify your character to ensure you pay back their loan. 


Although banks don’t always ask for a personal reference, they sometimes may ask for one to supplement your application for a loan. Typically, personal references are most often requested by banks or other financial institutions during the mortgage application process. 

Why Do Lenders Ask For a Personal Reference? 

Lenders need to verify that the information and image you are presenting to them is accurate. Your word is not sufficient in assuring them of this accuracy. Let’s look at a couple of more specific reasons why lenders ask for personal references: 

  • Prove Identity/Security: An identification card is often sufficient in proving one’s identity. But, personal references can assure a lender that you are who you say you are, and that they won’t be chasing a ghost if you don’t pay back a loan. 
  • Information Verification: Lenders will use personal references to verify the information you’ve provided in your loan application. For example, the reference can assure a lender that you are working and living where you indicated on your application. 
  • Contact Details: Finally, personal references can assure a lender that the contact details you provided are accurate. And, if they aren’t accurate, lenders can find solace knowing that your personal reference is able to get in touch with you if need be. 

Check out this article to learn about what a credit reference is.

What Information Do You Need to Provide For a Personal Reference?

When providing a personal reference, it’s important for you to provide accurate, up-to-date, and detailed information. Remember to include the following:

  • Full Names
  • Home Addresses
  • Phone Numbers (work and cell)
  • Email Addresses

It’s also a good idea to ask your references if they are ok with being a personal reference for you before providing their information to a lender. This way, they are prepared for the phone call and can confidently verify the information you’ve provided the lender with. 

Final Thoughts

References are a necessary act of security that lenders need to take in order to operate properly and safely. It’s a relatively easy way to strengthen your loan application. More often than not, when applying for a loan from most types of lenders, you will be asked to provide personal references. Make sure you choose individuals who know you well and can vouch for your trustworthiness.

Rating of 5/5 based on 3 votes.

Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Save With Loans Canada

Special Offers

Red American Express® Card

Red American Express® Card
Ends April 30, 2023

Earn up to 12,000 bonus Scene+™ points in your first year (that’s up to $120 towards travel).

View Offer
Cashback & Bonus Offer

Cashback & Bonus Offer
Ends March 1st, 2023

New Offer! Get up to $2,000 cashback + a $50 bonus on signing up. Conditions apply.

View Offer
Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.

View Offer
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.