loan denial letter

Why Did I Receive a Loan Denial Letter?


Taking out a personal loan isn’t uncommon in Canada. In fact, over 65% of Canadians have taken out at least one personal loan at some time in their life. To some, these statistics might indicate that loans are easy to come by.

Yet, when you applied for a loan, you received a loan denial letter rather than the money you needed to cover your current life expenses. Why did this happen?

At Tekaloan, we’re always here to answer your questions about how to get approved for a loan. That includes walking you through the tough reality of loan denial.

Read on to learn more about why you may have had your loan denied so that you can better prepare for your next application.

Your Credit Score Is Low

Just over half of Canadians have a credit score of 750 or higher. If your credit score is higher than 750, it won’t be difficult securing a loan. Anything over 668 is considered good, and anything over 750 is considered very good or even great. 

What if you have a credit score of 600 or lower? Bad credit in Canada is anything under 558, and if you’re in that range, you’re going to struggle to secure a loan.

The good news is that there are lenders like Tekaloan that will offer short-term loans without looking at credit scores. Instead, we look at your financial data and base our decision off of your current and projected financial stability.

Your Debt-to-Income Ratio Is Too High

Sometimes a good credit score isn’t enough to secure a loan, even one that doesn’t require a credit check. Most lenders are going to look at your DTI (debt-to-income) ratio. If too much of your income is devoted to paying off other loans (including mortgages, credit card debt, and student loans), you won’t be able to secure another loan.

The best way to navigate this obstacle is to focus on paying down your current debt. Yes, it’s going to take some time, but unless you can increase your income, paying off debt is the most surefire way to qualify for a new loan—and you may boost your credit score in the process.

You Asked for Too Much

It’s possible that your loan was denied because you asked for too much and lowering your request would result in an approval. There are a few reasons why this can happen.

The first is that the lender may not lend as much as you’re looking for. Here at Tekaloan, we focus on short-term loans, often in sums of less than $1000. We are not the right lender to work with if you need a $100,000 loan. The second is that the lender may determine that you can’t afford to pay back a loan of that size in a timely manner. 

Your Income Wasn’t Sufficient

Whether or not a lender looks at an applicant’s credit score, they’re going to ask for proof of income. Most lenders will also have a minimum income allowance to qualify for a loan of any size. For example, you must make at least $1200 per month to qualify for a Tekaloan.

Failing to meet a minimum isn’t the only issue an applicant can run into. If a lender feels that your income seems unstable, they may deny your request for a loan out of the fear that you won’t always be able to pay off your loan month to month. 

It’s never a good idea to take out a loan you can’t afford to pay off. However, if you know that you can but struggle to provide sufficient proof of income, one option is to add a cosigner to your application. A cosigner can be a friend or family member with sufficient, stable income who agrees to take on your loan payments if you are unable to pay them. 

You Didn’t Complete the Application

Here’s an easy one to fix: you may not have filled out the entire application. When you’re applying for a loan, you’re going to have to provide a lot of identifying information and documents establishing things like income. It’s important that you double check your application before you submit it.

If it’s unclear why you received a loan denial letter, contact the lender by phone. If you receive a loan denial letter due to missing information, you may be able to send along that missing information and get quick approval.

You Didn’t Meet Basic Requirements

In addition to a minimum income, lenders will often require applications to meet a number of other requirements in order to get approved for a loan. At Tekaloan, for example, we require that applicants:

  • are 18 or older
  • have a reliable job for at least three months before applying
  • have a low DTI ratio

If you do not meet all of these (and additional) requirements, you will not receive a loan from Tekaloan. 

Other lenders may also require lenders to meet an approved loan purpose. For example, some lenders provide medical loans to cover health-related expenses. If you apply for a loan with a designated purpose but don’t intend to use it for that purpose, you will receive a loan denial letter.

Don’t Get Discouraged by Your Loan Denial Letter

If you receive a loan denial letter, all hope is not lost. In some cases, you may need to make a few adjustments, like paying off your current debt. In others, partnering with a cosigner or providing missing information will lead to loan approval.

Are you looking for a small short-term loan that doesn’t require a credit check? Apply now for a Tekaloan and get a quick turnaround and easy loan renewals. 

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