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Bad Credit Loans in Canada: Tips and Options for Borrowers

In Canada, like in many places around the world, having bad credit can make it difficult to get access to financial services. A credit score below 560 is typically seen as a bad credit score in Canada, as reported by the credit bureau Equifax. If you have a poor credit score, you may struggle to get personal loans or credit cards. But even though it’s tough, there are ways for you to get help, like bad credit loans.

Bad credit loans, also known as poor credit loans or subprime loans, are designed for people with low credit scores. These loans cater to borrowers who may have faced money problems in the past, resulting in negative marks on their credit reports. Traditional lenders, such as banks and credit unions, tend to look at credit scores when deciding on a loan approval. However, some credit lenders take a different approach, focusing on other factors such as income and employment stability.

Can You Borrow Money with Bad Credit?

Yes,  it is possible to borrow money with bad credit. However, you will most likely face limited options and higher interest rates compared to those you would get if you had a good credit. It’s essential to carefully consider the terms and conditions of any loan offer and make sure you can pay it back without any problems.

Are there guaranteed loans for bad credit in Canada?

No, there are no guaranteed loans in Canada. A responsible lender will always assess your income to determine if you can repay the loan before offering it to you.

In fact, if a lender promises guaranteed approval, it could be a sign of a scam. So, if you come across a lender advertising guaranteed loan approval, be cautious.

However, some loans have lenient eligibility requirements, making approval almost guaranteed.

Are there no credit loans in Canada?

Yes, some lenders provide personal loans without even checking your credit. Instead of using your credit history, they might consider other factors like your rental history or total income to assess your ability to repay the loan.

Types of Bad Credit Loans

In Canada, there are various types of loans available to borrowers with bad credit, each with its own terms and conditions. Some common options include:

  • No Credit Check Loans: No credit check loans are loans where the lender doesn’t look at your credit history to decide if you can borrow money. Instead, they might check your income, job status, and other money-related things. These loans can be good for people with bad credit or no credit history because they can still get money without worrying about their credit score. But, these loans usually have higher interest rates and fees than regular loans, and you might have to pay them back faster.
  • Same Day Loans: Same day loans (also called “payday loans” or “instant loans”) are quick loans that you can get in a short time, usually within minutes or hours, making them ideal for emergencies or unexpected bills. These loans are quick to apply for and get approved, so you can receive the money you need fast. You can often get them without a credit check. Once you get your paycheque you can then pay back the loan. However, there is a catch: these loans have an average of 400% in interest. Because the interest is so high, they can be hard to pay back which can get you trapped in a cycle of debt.
  • Installment Loans: With these loans, you pay back a fixed amount of money every month for a certain time. They might be cheaper than payday loans, but they often have higher interest rates for people with bad credit.
  • Guarantor Loans: These loans involve a third person, called a guarantor, who promises to pay back the loan if you can’t. This makes the loan safer for the lender, so it’s easier for people with bad credit to get. But finding a guarantor can often prove to be difficult.
  • Secured Loans: These loans require you to put something valuable, like a car or a house, as security. If you can’t pay back the loan, the lender can take your collateral. Secured loans are easier to get if you have a bad credit, but you carry the risk of losing your collateral if unable to pay.

What is an online loan?

An online loan is a loan that you can apply for and handle completely online, without going to a physical bank. These loans are offered by online lenders and can be for personal expenses, like payday loans or installment loans. To apply, you fill out an online form and submit any needed documents electronically. If you’re approved, the money is deposited directly into your bank account. Online loans are popular because they’re easy to apply for and you can do it all from home.

Tips for Borrowing Money with Bad Credit

If you’re thinking about getting a loan in Canada but have bad credit, here are some tips to keep in mind:

  • Know Your Credit Score: Check your credit score before applying for a loan. This will help you understand what options you have. You can obtain a free copy of your credit report from credit bureaus such as Equifax or TransUnion.
  • Compare Lenders: Take the time to shop around and compare lenders to find the best terms and rates for your situation. Consider factors such as interest rates, fees, and repayment terms before making a decision.
  • Improve Your Credit: While it may not be feasible in the short term, taking steps to improve your credit score can help you get better loan options in the future. This may include paying off outstanding debts, making payments on time, and avoiding new credit inquiries.
  • Look for Other Options: Besides bad credit loans, look into other ways to get money such as credit unions, community organizations, or government programs. They might have better terms and be a better option for those with bad credit.
  • Read the Fine Print: Before signing any loan agreement, be sure to read the fine print carefully and understand all the terms and conditions. Pay attention to factors such as interest rates, fees, and repayment schedules to avoid any surprises down the line.

Allan Marshall & Associates Licensed Insolvency Trustee

Allan Marshall & Associates have been helping individuals and families with financial problems since 1979. Licensed Insolvency Trustees are regulated by the Canadian Federal Government and will review all your options, to help find the right solution to deal with your debt. Contact us today for a free consultation. We can help ™

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Matthew Fader

“I joined Allan Marshall and Associates in 2017 as an Estate Manager and have worked in the insolvency field since 2005. I feel with my counselling experience and positive outlook, I help to reassure our clients that we are there to help with any debt questions or financial insecurities they may have. Our main company goal is to ensure the best possible experience for those needing our services and treat every client with dignity and respect throughout the process.”