Can I get a personal loan with no credit score?
You can, though your options are much more limited. You might be able to qualify if you apply for the loan with a cosigner. Or consider borrowing from friends and family.
Your credit score is one of the most important factors in a personal loan application. Lenders often won’t consider you if you don’t meet their minimum credit score requirement. However, it’s only one of several factors they look at when determining your eligibility. Learn more below about what credit score is needed for a personal loan in Canada.
Minimum credit score for personal loans varies from lender to lender. Major financial institutions like banks and credit unions will want to see good to excellent credit (above 660), while online lenders can approve personal loans even if you have fair credit (560 to 659) or bad credit (below 560).
You would need to have excellent credit to get the lowest rates and largest loan amounts that a personal loan lender offers. However, you can often get a favourable deal even if your credit score is considered good.
Here is a breakdown of typical credit score ranges in Canada.
How to get a low interest loan
Although credit score plays a key role in whether or not you’ll get approved for a personal loan and how high or low your interest rate will be, it is just one of several factors that lenders examine. For example, you could have a decent credit score, but if the level of your monthly debt payments relative to your monthly income is high, lenders may hesitate to approve you.
Below are some important factors that lenders look at.
Understanding what credit score is needed for a personal loan won’t help you know if you’re eligible unless you know your credit score. You can check your credit score using one of the following methods or services.
The score you receive is usually based on a soft credit inquiry, which doesn’t affect your credit rating but may not be as accurate as a hard credit pull. When lenders evaluate a loan application, they’ll do a hard pull on your credit, which will temporarily decrease your credit score.
There are several steps you can take to potentially qualify for better rates by improving your credit score before you apply for a personal loan:
You can, though your options are much more limited. You might be able to qualify if you apply for the loan with a cosigner. Or consider borrowing from friends and family.
Lenders don’t usually put restrictions on how you can use your personal loan funds. That flexibility is one of the reasons why a personal loan is such an appealing financing option. That being said, some lenders may not be willing to lend you money for certain use cases.
Our research found that 41.3% of Canadians took out personal loans to buy a car, 19.5% to finance a mortgage, 15.8% to consolidate debt and 13.2% to finance home renovations. Here are some common ways people tend to use personal loans:
Overall representative example
If you borrowed $20,000 over a 5-year term at 9.50% APR (variable), you would make 60 monthly payments of $420.04 and pay $25,202.23 overall, which includes interest of $5,202.23. The overall cost for comparison is 9.50% APR representative.
You can get a personal loan with almost any credit score — or even no credit score. But you have more options if you have good to excellent credit. If you aren’t in a rush, consider taking the time to improve your credit rating so you can get an even more favorable deal.
Want to know more about how it all works? Check out our guide to personal loans.
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