Hi folks! Underwriting unsecured loans to Canadians needing debt consolidation is not as simple as you may think. After costs you should not expect to exceed a profit over 18% of your loan portfolio. Staff and management salaries should be 15-20% of the total portfolio.
General Guidelines
Loan Range: $2,000 – $30,000 – Employed Borrowers Only – No Origination Fees – Performance-Based Rate Adjustment – Minor Collections Acceptable
1. Purpose and Scope
This policy defines the recommended standards, procedures, and risk management framework for unsecured debt consolidation loans to employed Canadians.
Objectives:
- Provide consistent, fair, and compliant loan approval criteria.
- Protect portfolio quality and mitigate default risk.
- Encourage timely repayments through a performance-based interest rate adjustment.
2. Loan Overview
- Loan Type: Unsecured personal loan for debt consolidation.
- Loan Amounts: CAD $2,000 – $30,000.
- Term: 12 to 60 months (fixed).
- Interest Rate: Risk-based fixed APR with performance-based adjustments (see Section 7).
- Fees: No origination or organization fees; standard late payment and NSF fees may apply.
- Repayment: Pre-authorized debit (PAD) from a Canadian chequing account.
3. Borrower Eligibility
- Residency: Canadian citizen or permanent resident.
- Age: 19+
- Income: Minimum gross annual employment income of $28,000.
- Banking: Active Canadian chequing account with direct deposit.
- Debt Purpose: Loan must consolidate all overdue debts.
- Minimum 6 months at current employer or 12 months in same industry.
- Income must be from employment only (no self-employed, no pensions, no government benefits as primary income).
4. Requirements
- Government-issued photo ID (front and back).
- Proof of employment/income:
- 3 months bank statements showing payroll, no NSF or O/D use 30 days AND
- Last two pay stubs OR employment verification letter
- Proof of address (utility bill, lease, driver’s license)
- Statement(s) or letter(s) for debt(s) being consolidated
- Signed credit bureau consent
- Third party consent(s) for all debts to be paid out
5. Credit Assessment
5.1 Credit Bureau Review
- Sources: Equifax and/or TransUnion.
- Minimum Credit Score: 620.
- Derogatory History:
- Bankruptcies or consumer proposals within past 24 months: not allowed.
- Collections : R5/I5 acceptable
- Serious delinquency (R7/I7 or higher): decline
5.2 Debt-to-Income Ratios
- Net DTI (post-loan): ≤ 65%
6. Loan Sizing & Risk Tiers
| Tier | Credit Score | APR Range | Max Term | Max Loan |
|---|---|---|---|---|
| Prime | 620+ | 24.99% | 60 mo | $30,000 |
| Near-Prime | 600-619 | 24.99% | 36 mo | $20,000 |
| Subprime | 550-618 | 33.99% | 24 mo | $6,000 |
I believe in this underwriting policy will prosper ONLY if combined with very strong fraud prevention and recovery personnel with a thorough understanding of risk and how it affects the portfolio on a rolling basis as well as how to condense when needed depending on the funds performance results at a given time.
DGB
Legal disclaimer: The material provided on this web site is for general information purposes only. It is not intended to provide legal or accounting advice.
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Gig Worker or Self Employed Needs This