Your credit score influences your eligibility for loans, the interest rate you will pay, and the total amount you can apply for. Individuals with higher credit scores stand a better chance of receiving loans than those with bad credit.
It can be challenging for applicants with bad credit to get approved for retail loans like personal loans, car loans, two-wheeler loans, educational institutions loans, etc. if their scores on the credit report are average (500 to 649) or poor (300 to 499). However, specific lending organizations go further than the fundamental criteria for eligibility and are willing to provide bad credit loans Canada.
However, bad credit loans Canada may have higher interest rates and lower loan amounts. Candidates with exceptional qualifications may be eligible for the most favorable price and terms.
In this blog, we’ll explore the types of bad credit loans Canada, its top providers, and tips for securing bad credit loans Canada.
Types of Bad Credit Loans Canada
Bad credit card loans Canada are more comprehensive than traditional, unsecured loans. Here are the types of bad credit loans Canada offers:
1. Secured loans
Secured loans are easier to get and usually have better rates because the lender has less risk—people with bad credit who own valuable stuff they can use as collateral.
Pros: If you have poor credit, you might get lower interest rates since you use collateral.
Cons: If you can’t pay, the lender can take your stuff to get their money back.
2. Unsecured loans
Unsecured loans don’t require you to give anything valuable as security. Lenders decide based on your credit, income, and debts. If you can’t pay, they can’t take your stuff. Most people can apply for these loans.
Pros: Your stuff is safe even if you can’t pay.
Cons: Lenders look at your credit a lot, so it’s harder to get approved or get low rates if it’s not great.
3. Joint personal loans
Joint personal loans mean you apply for a loan with someone you trust if you have bad credit loans in Canada. It can help you get approved, but your credit scores could be affected if you can’t pay. Best for People with bad credit who have a friend or family member to help.
Pros: It makes it easier for those with bad credit loans Canada to qualify, lowering the risk for the primary borrower.
Cons: If you can pay, the lender can collect from both borrowers, which can help your credit scores.
4. Payday loans
Payday loans are small loans with very high fees and interest rates. They’re risky and can lead to a cycle of debt. It is good only if you can pay it back quickly and handle the high fees.
Pros: No credit check, and you get money fast.
Cons: Extremely high fees, and they can charge up to 400% interest, which is a lot. Avoid them if you can.
5. Bad credit home equity loans
Home equity loans let you use the value of your home, even if you have bad credit. You get a lump sum with fixed rates and can pay it off for up to 30 years. Best for people who need a lot of money and own a home.
Pros: You can borrow up to 80% of your home’s value.
Cons: If you can’t pay, you could lose your home because it’s collateral.
6. HELOC loans for bad credit
HELOC loans for lousy credit are tied to your home’s equity. You can borrow what you need, pay it back, and borrow again, but the interest rates can change. It is best for people who need flexibility in borrowing against their home’s equity.
Pros: You can borrow and repay as needed.
Cons: The interest rates can go up and down, which might mean higher monthly payments.
7. Student loans for bad credit
Bad credit loans Canada for students can help you pay for school if your credit score is not good. Some lenders, like Upstart, allow you to use personal loans for education expenses. Best for People who need money for education.
Pros: Some lenders can cover your entire tuition.
Cons: Check the terms carefully; some lenders might not offer flexible options if you can’t pay later.
Best Bad Credit Loans Canada
1. LoanConnect
LoanConnect is a service that has a vast network of lenders and can provide you with loan offers based on your circumstances. One of the best choices for bad credit loans Canada, as it saves you time and gives you instant results after use. Easily compare offers from multiple financial institutions and check for new offers regularly. Additionally, depending on your situation, you can choose between secured and unsecured loans.
Loan Details:
- Loan amount: $500 – $50,000
- APR: 6.99% – 46.96%
- Loan terms: 3 – 120 months
- Interest rate type: Fixed
- Minimum credit score required: 300
- No application, origination, or brokerage fees.
- Fast turnaround time: You could receive funds in as little as 24 hours.
Pros:
- Get pre-approved in just five minutes.
- Offers many options for bad credit loans.
- The BBB accredits it with an A+ rating.
- Fast funding for your loan needs.
Cons:
- LoanConnect is not a direct lender itself.
- Interest rates can be high if you have bad credit.
- You might miss out on loan offers from lenders not partnered with LoanConnect.
Eligibility
- Be at least 18 (19 years old in some places).
- Be a Canadian citizen or resident.
- Have a valid bank account.
2. Loans Canada
Loans Canada is an online broker that partners with over 60 lenders. You fill out one application and get your matches for free. It’s considered one of the best bad credit loans Canada.
Loan details
- Loan amount: $300 – $50,000
- APR: 6.99% – 46.96%
- Loan terms: 3 – 60 months
- Interest rate type: Fixed
- Minimum credit score required: 300
- No application, origination, or brokerage fees.
- Fast turnaround time: You could receive funds in as little as 24 hours.
- Available in all provinces in Canada.
Pros
- Easy online application.
- Quick deposits.
- Offers high loan amounts.
- There is no need for collateral to secure a bad credit loan.
Cons
- Interest rates can be high.
- No online quotes were provided.
Eligibility
- Be a Canadian citizen or resident.
- Be of the age of majority in your province.
- Have a minimum credit score of 300.
- Have a source of income.
3. Spring Financial
Spring Financial is a lender that offers fast approval and funding, making it one of the best options for those seeking bad credit loans Canada. Spring Financial is known for its credit builder loan, which allows you to improve your credit score by making timely payments.
Loan Details
- Loan amount: $500 – $35,000
- APR: 9.99% – 46.99%
- Loan terms: 6 – 60 months
- Interest rate type: Fixed
- Minimum credit score required: 500
- The only fee is a $30 NSF fee for non-sufficient funds.
- Fast turnaround time: You could receive your loan within 24 hours.
- Available in all provinces in Canada.
Pros
- It’s 100% online, providing convenience.
- Offers fast funding through e-Transfer.
- There are no prepayment penalties if you want to repay your loan early.
Cons
- Interest rates can be high for lousy credit borrowers.
- It has a C- BBB rating and received complaints about the credit builder loan.
Eligibility
- Should be a resident of Canada
- Minimum Credit Score: 500
- Minimum Age: 18
- Minimum Income: $1,800
4. Money Mart
Money Mart is a well-established lender in Canada known for offering payday and installment loans to people with bad credit.
Loan benefits
- Loan amount: $500 – $15,000
- APR: 29.9% – 46.9%
- Loan terms: 6 – 60 months
- Interest rate type: Fixed
- Minimum credit score required: 300
- No fees.
- Quick turnaround time – you can get your loan in less than a day.
- Available in several provinces: AB, BC, MB, NB, NS, NT, ON, PEI, SK, and YT.
Pros
- You can get a payday loan almost instantly and an installment loan in as little as 2 hours, making it quick.
- Convenient options to apply online or visit one of their 500+ store locations.
- Money Mart has more lenient requirements compared to banks and credit unions. You can qualify with a checking account and a regular source of income.
Cons
- Interest rates can be high, a common drawback for lousy credit loans.
- Availability varies by province for in-store and online applications.
Eligibility
- Be the age of majority in your province or territory with a valid ID.
- Provide proof of steady income.
- Have an active checking account.
Tips to Secure Bad Credit Loans Canada
Even though getting bad credit loans Canada can be challenging, there are steps you can take to increase your chances of securing one, such as:
- Check your credit scores and reports: Checking your credit can help you clear out private loan providers whose credit requirements you are likely to miss, even if you already know your credit score requires work. Checking for shortcomings in your credit report and challenging them could boost your scores.
- Pre-qualifying: You may apply pre-qualification to determine whether you can be approved for a loan. You will additionally be ready to evaluate rates since you can see your estimated loan terms.
- Using a co-signer or co-borrower: If a close friend or relative has good credit, you can ask them to co-sign your loan or co-borrow along with you with bad credit loans in Canada. Co-signers agree to pay back the loan if the borrower fails on payments. They need access to loan funds or payment information. On the other hand, co-borrowers have access to the cash and payment information and are equally responsible for the loan and any missed or late payments. Note that your co-borrower or co-signer’s credit will be impacted along with yours if you fail to repay the loan as scheduled.
- Collateral addition: Collateral is often utilized when securing a personal loan. For instance, you can use your car or the money in your savings account as collateral. The lender can remove your collateral if you fail to pay the loan. Due to this, personal loans with security are more cautious and more easily accessible for applicants with bad credit.
- Including additional income: In your loan application, many lenders may let you list non-employment income like Social Security perks, alimony, or child support. Your chances of being approved may increase with a higher paycheck.
Alternatives to high-interest loans
Having bad credit can make getting credit products like 0% APR credit cards or low-interest personal loans challenging.
If you can’t qualify for low-interest options due to bad credit, consider these alternatives:
- Peer-to-peer (P2P) loans: These loans come from individual investors, not banks. They might be more open to lower credit scores and offer better rates.
- Life insurance policy loan: If you have life insurance, you can use it as collateral to borrow from its cash value. Usually, no credit check is required, and terms can be favorable.
- 401(k) loan: You can borrow from your workplace retirement account. It involves repaying with interest, but it goes back into your 401(k). It typically doesn’t require a minimum credit score. However, use this as a last resort, as it impacts your future retirement savings.
Conclusion
Getting a personal loan or borrowing money should be your last choice because it can be pricey, especially if your credit isn’t great. It’s better to try saving money instead. Be cautious of scammers who might try to trick you into taking a loan and causing financial problems.
If you have bad credit, it can be tricky getting personal loans. Some lenders are more flexible with credit but often charge higher interest rates and fees. That’s why it’s essential to take your time, check different lenders, and see if you can pre-qualify with them to find the best deal for bad credit loans Canada.
FAQs
What is the most accessible loan to get with bad credit?
The most accessible loans to get approved for in Canada are:
– Payday loans (no minimum credit score required).
– Car title loans (use your car as collateral).
– Credit builder loans (you make payments before accessing the loan).
Examples of quick payday loan providers in Canada include iCASH, GoDay, Mr. Payday, My Canada Payday, and Loan Express.Where can I borrow money instantly in Canada?
You can borrow money instantly in Canada from online lenders like iCash. They offer quick loans, and if you meet specific criteria, your application can be accepted within minutes, with the money deposited into your bank account within 24 hours.
Can I get a loan with a 500 credit score?
Yes, you can get a loan with a 500 credit score. While securing a traditional personal loan may be challenging, you're more likely to qualify for a secured loan, such as an auto loan, where the vehicle serves as collateral. If you have a bad credit score of 500, the types of loans available include installment, payday, and car title loans. However, it's important to note that loans for bad credit often come with high interest rates.
Can I get a loan of 50,000 with bad credit?
Yes, various lenders provide options for secured and unsecured loans of $ 50,000 or over, even with bad credit.
Loans Canada offers bad credit loans from $500 to $50,000 with a 3 to 60-month term and APR ranging from 1.99%-46.96%.
Easy Financial is another lender that provides secured loans of up to $75,000 with interest rates of 9.99% to 46.96%.How can I fix my bad credit in Canada?
– Check your credit report: Get a free copy from Equifax or TransUnion. Use services like Credit Karma or Borrowell to check your credit score. Dispute any errors.
– Pay bills on time: Timely payments boost your credit. Set up automatic payments or reminders.
– Pay off debt: Aim to keep your credit utilization under 30%. Pay off high-interest debts, request a higher credit limit, or consolidate into a lower-interest loan. Consider lenders like Refresh Financial or Fairstone.
– Re-establish credit: If you have bad or no credit, get a secured credit card, a loan, or a line of credit. Co-signing or becoming an authorized user can help, but use credit wisely and pay on time.