Bad Credit Loans In Canada: All You Need to Know

Bad credit loans in Canada deserve all the attention as financial emergencies can pop up anytime and unless you’re financially buoyant at that particular moment, there is usually the need to get a quick loan.

This option, however, isn’t easily accessible to every Canadian, especially people with a terrible credit score. They are at a disadvantage because most lenders are usually skeptical about lending money to someone who couldn’t take care of their credit score.

A bad credit score signals to the lender that the applicant doesn’t have a record of settling their bills or loans on time. This discourages the lender and the loan doesn’t get approved, as the lender will understandably want to protect their interest and not risk the borrower defaulting on the loan.

However, the good news is that some lenders are willing to give out loans to people with bad credit. Such loans are referred to as bad credit loans.

Getting these loans is not hard as long as you can find lenders with loan packages with favourable loan packages.

Also, you need to understand how these loans work so you can make the right decision. Without further ado, here is All you need to know about bad credit loans in Canada.

See another perspective when it comes to home equity loan.

What is a credit or credit score?

A credit score is a three-digit number that represents your credit behaviour. It is what creditors consider to determine your attitude regarding loan repayment, i.e. how you handle your bills and loans.

A good credit score often helps one to secure loans with low-interest rates, as it signals to lenders that you are responsible financially. It is important to take care of your credit score so you won’t have issues when you need financial assistance or service from financial institutions.

What is a bad credit?

Since you have more than one credit score, it is hard to generalize your credit score as bad. Several factors determine the status of your credit score at a particular point in time. One of them is that if a lender sets a minimum credit requirement and you don’t meet up with it, your credit is considered bad at that moment.

Another factor is the scoring model that is used to calculate your credit score. If the credit reporting agency that provides your credit report uses a strict or harsh scoring model, your credit will come out differently than when it is calculated using a more relaxed model.

In Canada, credit scores are usually anywhere between 300 and 900, and if yours fall below 560, it is considered as bad.

However, if you take good care of your credit score and keep it above 700, you shouldn’t have issues with any lender, as it is a number that is generally considered as a good credit score. 

Can I apply for a loan if I have bad credit?

As important as it is to have good credit when applying for loans, having bad credit doesn’t necessarily hinder you from getting the needed funds. All you have to do is locate the right lenders who offer bad credit loans. Some of the loan options available for people who fall in the bad credit category include payday loans, personal loans, and so on.

However, this doesn’t mean you can’t get a loan from a lender who doesn’t offer bad credit loans, it would just be difficult and the interest rate on such loan would be massive.

To help make this easy on you, we’ve compiled a list of platforms that connect borrowers to lenders who offer bad credit loans. Keep reading to know more.

How do I apply for a loan with Bad Credit?

1. Pick an options from the list of online loan platforms that are listed in this article.

2. Fill out the application and submit it.

3. Wait for lenders to contact you with loan offers.

4. You will get a notification once your loan is approved.

5. You will then receive the funds in your bank account.

Top Bad Credit Loans in Canada

1. Spring Financial: This is an online lender that offers payday loans of up to $5,000 to borrowers, regardless of their credit score or even if they have a credit history at all. They offer different loan options, none of which requires collateral, and funds are usually disbursed on the same day of application. Every type of loan granted by Spring Financial comes with flexible payment options and sensible interest rates.

2. Loan Canada: Whenever you find yourself in a pinch and need a quick personal loan as a way out, you can always apply for a loan on Loan Canada. They have a simple three-step application procedure where you select your desired loan option, apply for it, and receive mouth-watering offers. Providing up to $50,000 in personal loans, Loan Canada is a reliable platform in times of emergency. They also offer loans to borrowers with a bad credit score.

3. Prets Quebec: As a provider of both personal and commercial loans, this trusted platform offers different kinds of loans such as car loans, debt consolidation loans, credit rehabilitation savings loans, and more.

They connect borrowers with numerous lenders from whom borrowers can get sensible interest loans in three easy steps. All they have to do is apply online, submit the necessary documents, and await a response which will either come via their mail or phone number. People with bad credit can apply since having a good credit isn’t one of the lending criteria of lenders here.

4. Compare Hub: This is a loan comparison platform that connects borrowers with the top lenders in Canada. With Compare Hub, you will have access to a variety of lenders that offer loans with attractive interest rates.

It provides you with the opportunity to compare offers from different lenders and pick the one that suits you the most. One of the many unique features of this platform is that it provides free credit checks, so borrowers can easily find out what their credit score is at that point in time. 

5. LoansConnect: Here, you can get low-interest loans ranging from $500-$50,000 and pay it back in 3-120 months. Even if you have a subpar credit score, you can always get unsecured loans from lenders with quick approval. Funds gotten through LoansConnect can be used for any kind of expenses such as medical expenses, education expenses, consolidating debts, and so on. Its application process is also very smooth.

What do I look out for when applying for a bad credit loan?

It is axiomatically hard to get a loan when you have bad credit, so it is understandable that as a borrower, you would want to quickly accept any term stated by any lender who is willing to loan you money.

However, it is important to take your time to look through the terms of the loan that you are getting and ensure that they are terms that will not come back to haunt you or make your life harder.

With that in mind, here are some red flags that you might want to look out for:

1. Interest rate: Make sure the interest rate charged on the loan is not so high that it will make it almost impossible for you to repay your debt. If a lender offers you a bad credit loan and you know you won’t be able to afford to the interest rate charged on it, it is advisable to locate another lender who will charge you the kind of interest rate that you know you can pay back.

2. Hidden fees and charges: Ensure that there are no hidden fees and charges that might be brought up after you have accepted the loan. The way to do this is to read and reread the terms of the loan before accepting it.

3. Penalties: Some lenders often apply a penalty when you miss payments or when you don’t pay on time. It is important to know what the penalty will be if you ever find yourself in such situation.

How to be eligible for a bad credit loan

To qualify for a bad credit loan, you must:

• Be 18 years and above.
• Have a registered personal bank account.
• Not have a bankruptcy case.
• Have a job where you’ve been employed for at least 3 months.
• Be a Canadian citizen or at least a permanent resident.
• Have an active phone number and email address.

Can I use bad credit loans to improve my bad credit?

It is no secret that one of the fastest ways to repair a bad credit is to start paying your bills in a timely manner. The same thing applies to bad credit loans. When you take a bad credit loan and pay it back on time, this will have a positive effect on your credit score and if you don’t, you can be rest assured that it will worsen your credit.

However, don’t limit your borrowing to bad credit loans, try to get normal personal loans too, as this will also help to quickly improve your credit.

How do I improve my Credit Score in Canada?

1. The most important factor that determines your credit status is your attitude towards paying your bills. If you want to improve your credit, start paying your bills on time.

2. Start paying off any debts that you may have in your credit history, this will help to clean up your history, thereby improving your credit.

3. You can always solicit the help of credit repair companies who will work with you to settle your creditors.

4. Ensure to keep your credit cards open. Do not shut them down even after paying them off.

To Summarize:

Having a bad credit often hinder one’s plans to get a loan to cater for one expense or the other but with bad credit loans, you never have to worry about that. Numerous lenders are willing to grant you loans regardless of your credit history, you just have to locate them and compare offers so you can get the best.

Now that you have the information regarding All you need to know about bad credit loans in Canada, you are ready to make an informed financial decision.