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If you’re one of the 1 million Canadians with bad credit, you probably know first-hand how it can disrupt every area of your life. From getting approved for a credit card, applying for a mortgage, renting an apartment, or even getting a job, having bad credit makes even the most important tasks difficult. But there are options and you’re not totally out of luck! Read on to find out about the best bad credit loans in Canada.
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Guaranteed Approval Bad Credit Loans in Canada
Getting a personal loan when you have bad credit isn’t easy. Many lenders won’t approve you for a personal loan if you’ve made choices that have resulted in bad credit, bankruptcy, or defaulted loans, but there are still options out there. Here’s our list of the top recommended bad credit lenders, and there is more information about each lender further down in this article.
|How Much You Can Borrow||The Interest Rate You’ll Pay||More Info|
|LoanConnect||$500 - $50,000||4.8% - 49.96%||Learn More|
|Ferratum Loans||$2,000 - $10,000||Up to 18.9%||Learn More|
|Refresh Financial||$1,200 - $25,000 (location dependent)||9.47% - 20.07%||Learn More|
|Loan Away||$1,000 - $5,000||19.9% - 45.9%||Learn More|
|Northstar Brokers||$300 - $3,000||Not specified||Learn More|
|Lending Mate||$2,000 - $10,000||34.9% - 43%||Learn More|
Bad Credit Loans: Lenders vs Banks
When you apply for a loan through either a bad credit lender or a bank, the first thing your lender will do is pull your credit report. Your credit report shares information about your financial history, including whether you’ve declared bankruptcy or whether you’ve defaulted on any loans. If either of these things has happened to you, you’ll likely have a bad credit score, and unfortunately, there aren’t many mainstream banks in Canada that will approve a loan for a borrower with bad credit.
If you have bad credit, you’ll need to turn to an institution that is not a bank to secure a loan. This situation is where bad credit lenders come in handy. Bad credit lenders are private lenders for personal loans, and there are several in Canada. The main difference between bad credit lenders and banks is that banks tend to only lend money to individuals with good to excellent credit scores and an impeccable credit history, whereas bad credit lenders take a much wider range of factors into consideration between deciding whether to loan you money. There are a few key differences in how banks and bad credit lenders will approach your loan application:
- Some Canadian bad credit lenders will guarantee loan approval, even if you’ve had a bankruptcy, defaulted on a loan, or been in a consumer proposal. These money mistakes are usually no-go’s for banks.
- Many of Canada’s bad credit lenders are available online only. Since they don’t have physical branches, they can pass on those savings to the borrower, and keep your lending costs reasonable, even though you have bad credit and are riskier than the average borrower.
- Some bad credit lenders will approve you for a bad credit loan without a credit check. Instead, they’ll take other factors into account when approving your loan, like your debt load and your income. A traditional lender like a bank will always check your credit score and will deny your loan even if you prove that you can pay it off.
- You can expect to pay higher interest rates when you apply for a loan with a bad credit lender than you would through a regular bank. These higher interest rates offset the increased risk that bad credit lenders take on when approving a loan for someone with bad credit.
Applying for a Bad Credit Loan with No Credit Check
Sometimes, if your credit score is very low, it might be worthwhile to seek out a lender who will approve your loan with no credit check. In this case, your lender will use other information to determine whether you can pay off your loan, so be ready to answer some questions about your finances. Some examples of the types of questions lenders may ask you include:
- Your income, either hourly or annually (and be prepared to provide proof)
- Whether you are employed or self-employed, how large the business is, and how long you’ve worked there
- Whether you have someone who can co-sign on your loan
- Whether you have declared bankruptcy or are currently going through bankruptcy
- How much debt you have, what types, and what the interest rates are
Benefits of Obtaining a Bad Credit Loan
While bad credit loans in Canada have high-interest rates, there are some benefits to obtaining one.
- Improved credit score: The best way to rebuild bad credit is to prove you can repay loans reliably. Applying for a bad credit loan and making your repayments on time will demonstrate to future lenders that you are a trustworthy borrower, and your credit score will improve.
- Better interest rates: When you have bad credit, the lowest interest rates on loans will not be an option for you. But bad credit loans in Canada can have better interest rates than their expensive cousin – the payday loan – which has interest rates up to several hundred percents.
- Borrow big sums: If you need to borrow a large amount of money quickly, a bad credit loan is a better option than several smaller loans from a payday loan company or spreading the debt across several credit cards (which can have interest rates of 18% or higher). Bad credit loans are available in amounts up to tens of thousands of dollars.
How to Choose the Right Personal Loan for Bad Credit
There are many bad credit lenders in Canada, so when you are doing your research and choosing the right one for your situation, keep these factors in mind:
- Interest rates: The lower the interest rate, the better – so prioritize lenders offering reasonable interest rates. Make sure you check their maximum interest rate before applying for the loan and do the math on whether you can afford the payments with the interest rate they offer you.
- Fees: Some bad credit lenders require you to pay either a flat fee or a percentage of your loan amount. Read the fine print of your loan agreement to check for any of these possibly hidden fees.
- Penalties: If you miss a payment on your bad credit loan, you’ll usually pay a penalty. The same is true if you want to pay your loan off early or make a late payment. Get a clear understanding of the possible penalties before signing up for your loan.
- Credit reporting: A benefit of bad credit loans is that they report your regular payments to the credit reporting agencies in Canada, which in turn will boost your credit score. Make sure the lender you are considering reports your loan so that you can rebuild your credit score.
Top Unsecured Bad Credit Loans in Canada
An unsecured loan does not use any collateral (such as your car) as security for your loan. Most lines of credit and credit cards offered by traditional banks are unsecured and have the benefit of not risking your personal property if you can’t keep up with your payments.
If you’re over the age of majority and a Canadian citizen, you qualify to apply for a Loan Connect loan and borrow between $5,000 and $50,000. Loan Connect promises to give you a reply about your application immediately and connect you with lenders who can provide you with funds within 24 hours of submitting your application. Loan Connect accepts applicants with bad credit, those in a consumer proposal, and those with bankruptcies on their credit reports.
To apply for a Ferratum Loan, you must be at least 18 years old, a permanent resident of Canada, and with your employer for at least three months. You can borrow between $2,000 and $10,000 for up to 5 years, and you can choose to make payments weekly, bi-weekly, or monthly. Ferratum Loans does not add any extra fees to their loans, and you can pay your loan off ahead of schedule without penalties. The interest rates are as low as 18.90%, and you can receive your funds in 24 hours. On the downside: Ferratum Loans are only available for residents of Newfoundland, Nova Scotia, New Brunswick, Ontario, Alberta, or British Columbia.
LendingMate offers loans for Canadians between 19 and 75 years of age, and they can lend to anybody, regardless of credit score, as long as they are not bankrupt or in an active consumer proposal. All you need to do is provide a suitable guarantor. That means if a friend or family member trusts you will make payments on time, they can be your guarantor and you can borrow the money you need over a more flexible term. LendingMate has a 95% approval rate and you can borrow up to $10,000 within 24 hours.
To apply for a loan through Loan Away, you need to be at least 18 years or older, be a Canadian citizen, not be in bankruptcy or consumer proposal proceedings, and have been employed for three months or more. If you meet these requirements, you can apply for a personal loan as large as $5,000, and repay over three years. Loan Away operates in Alberta, Ontario, and Newfoundland, and they claim to accept over 90% of loan applications. It takes about 8 minutes to apply for a loan through Loan Away, and the money could be deposited in your account in 24 hours.
EasyFinancial is an option for Canadians who are over 18 years old and are Canadian residents. To apply for a loan through EasyFinancial, you’ll need a bank account and be employed for at least two months. Easy Financial offers both secured and unsecured loans in Canada, and they don’t discriminate against Canadians with previous bankruptcies on their credit history. They offer unsecured loans up to $15,000 and secured loans up to $25,000. EasyFinancial reports your regular payments to Equifax and Transunion, which will help you rebuild your credit score.
If you’ve had a chequing account for three months, are free of bankruptcy proceedings, and have been employed for six months or more, Northstar Brokers might be a good option for you. This bad credit lender requires you to have lived at the same address for six months and have your employment earnings deposited through direct deposit or cheque. You can apply for unsecured loans in amounts up to $3,000, and they won’t run a credit check as part of the application process.
Top Secured Bad Credit Loans in Canada
If you have collateral like home equity, a car, jewelry, or other valuable items, you can use it to secure a loan and obtain a lower interest rate. The downside to secured loans is that if you can’t make your payments, your lender can seize your collateral as payment.
To apply for a bad credit loan through Refresh Financial, you’ll need to be 18 years of age or older, be a citizen of Canada, hold a bank account, and meet their minimum income requirements. You’ll also need collateral in the form of cash to apply for their secured bad credit personal loans. The concept behind Refresh Financial is that you will provide cash collateral upfront, and then take out a loan, which you will repay over time. Refresh Financial will report your responsible borrowing to the Canadian credit bureaus, which helps you rebuild your credit score. After you pay back your loan, your original collateral is returned to you.
With Prudent Financial, you can use your car, home equity, or other valuable items to secure a bad credit loan even if you have a history of bankruptcy or consumer proposal. You’ll need to be at least 18 years of age, be employed for at least six months in a business that has at least ten employees, earn at least $38,000 per year, and be able to prove it with pay stubs. If you meet these lending criteria, you can borrow up to $25,000 for a car loan, up to $20,000 for a personal loan with a car as collateral, up to $5,000 for a personal loan using other collateral, or up to $15,000 using your home equity as collateral.
Tribecca Finance offers more than just secured loans: they also offer home equity loans and mortgages to Canadian citizens who are 18 years of age or older and live in the Greater Toronto Area. When you apply for a secured loan through Tribecca Finance, you will use your car or valuables as collateral for a loan, and you’ll need to earn at least $20,000 per year to qualify.
If you need a loan and don’t have traditional collateral like a car or valuables, but you have equity in your home, then Canadalend.com may be a good place to obtain cash fast. Canadalend.com uses the equity in your home as collateral for your bad credit loan. Your credit score doesn’t matter, and neither does your history with bankruptcy or consumer proposal. You’ll need to be at least 18 years of age and a Canadian citizen.
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