Online Bad Credit Loans

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• Bad credit explained
• How a bad credit loan works
• Advantages of a bad credit loan
• Drawbacks of a bad credit loan
• What the numbers say
• Bad credit loan FAQs

What Is Bad Credit?

When trying to borrow money for any reason – a mortgage, a medical bill, a car, debt consolidation, or something else entirely – most lenders will ask for a credit check. This is so they can assess your ability to pay the loan back. But what exactly do they look at?

What Is a Credit Report?

Your credit report contains your full Canadian credit history, which is a distillation of your financial past and present, and which helps the lender decide whether they want to work with you. It includes information about your income, your existing debts (including credit card debt and auto loans), your past debt repayment history (including any missed or late payments, as well as any positive payment history), your credit utilization ratio (otherwise known as your income to debt ratio), and so on.

All of this information is condensed into a three-digit number known as your credit score. This credit score is a quick reference tool for lenders and consumers alike, and each person’s credit score (and wider credit history) is monitored and maintained by official credit agencies.

How Does a Bad Credit Loan Work?

A bad credit personal loan is really any form of debt held by a bad credit borrower. They are typically provided in a lump sum, with terms that can vary from a few months to up to 3 to 5 years. The loan amount offered tend to be smaller than to those with good credit, and the terms (especially interest rate) tend to be harsher. This helps the loan companies offset their higher risk.

It is also important to note that the lending parameters for these types of loans are generally simpler than for other types of loan. Direct lenders who provide bad credit loans often do not require a complete credit check, instead asking for ID, financial documents, and income verification. This ensures that consumers who have a history of consumer proposals, credit counselling, restructuring, bankruptcy or other delinquencies can still be successful in obtaining a loan.

How Do I Qualify For a Bad Credit Loan?

Typical qualification requirements include steady income from full time or part time employment (sometimes lenders have a minimum income requirement), being of age of majority in the province of residence, and no undischarged bankruptcy or consumer proposal on the borrower’s file. Other factors may be considered, and each application is reviewed on a case by case basis.

Required Documents

When applying for both secured and unsecured loans in Canada, you will need to supply:

1. Proof of address and age

These documents serve to verify that the borrower is age of majority in their province, and a resident of Canada.

2. Existing Mortgages/Debts and Number of Dependents

This is to gain visibility into the borrower’s existing obligations. In most cases, mortgages are senior to all other types of debt, meaning that if the borrower declares bankruptcy, mortgage providers get paid out first when assets are liquidated. Dependent information can either help or hinder your loan application, depending on circumstances. For example, some lenders consider child tax credit as a form of income.

3. Proof of employment

Most bad credit borrowers use unsecured loans, which means they are provided solely on the basis of the borrower’s cash flows. This means that it is important to provide employment information, such as salary and length of time spent at the job.

4. Bank account information

Lastly, you will need to provide your bank account details so that the loan amount can be deposited into your account.

Once all of this information has been provided, the lender will assess the overall credit profile and come up with a maximum lending amount, rate and loan term. If this proposed loan structure is agreeable to the borrower, he/she then has to sign the documentation and the loan principal amount will be deposited into their personal bank account. Thereafter, the borrower has to repay the principal and interest at periodic intervals, as per the stipulated contract.

Advantages of a Bad Credit Loan

Accessible

While most personal loans offered by financial institutions require the borrower to come in and visit a specialist loan office, or at the very least complete a long application process, bad credit loans are usually available online and can be accessed easily by any Canadian with a Wi-Fi connection.

Easily Available

When pursuing loans for bad credit, consumers do not have to worry about their credit histories as lenders of these loans do not perform full credit checks. Bad credit loans are mainly lent out on the basis of monthly income.

How To Compare Lenders

The good news is that there are now many loan companies who offer solutions for those with poor credit. The options come in various forms: online lenders, private lenders, direct lenders, credit unions, and so on. Understanding which are the best bad credit loans may seem like an uphill challenge, but that’s where the table above can help. Here you can analyze each lender’s typical rates, loan amounts, and loan types to find what best suits your needs. This includes debt consolidation loans, credit check loans, installment loans, and much more. And to make life really easy, all have an online application form, and deposit the loan amount directly into your bank account, providing instant bank verification.

What The Numbers Say

The chart below shows that nearly 50% of Canadians fall within the 700-799 credit score range. Also, over 25% of Canadians have a credit score below 699.

Bad Credit Loans Frequently Asked Questions

How Big of a Personal Loan Can I Get Approved for with Bad Credit?

Typically, bad credit loans can be anywhere between $500 and $5,000, but can go higher.

Can I Receive a Bad Credit Loan with a Previous Bankruptcy on My Record?

Yes, most bad credit loan providers offer financing even to borrowers with previous delinquencies, bankruptcies and consumer proposals. However, if the bankruptcy or consumer proposal are open (not discharged), it will make it extremely difficult to get approved for any kind of credit.

Do I Need a Downpayment for a Bad Credit Loan in Canada?

No, bad credit loan providers do not require any money to be put upfront.

What are the Consequences for Non-Repayment of Bad Credit Loans in Canada?

Most loan providers have financial penalties in place, which can add up quickly. Therefore, it is important to stay prudent with borrowing amounts and repay loans on time.

What Interest Rates Should I Expect for Bad Credit Loans?

You can expect a worse interest rate, possibly starting at about 20%, but this can rise much higher.

If you can improve your credit score, you should be able to access loans starting at about 7%. Banks will usually reject borrowers with bad credit, while alternative lenders will issue the loans, but will charge higher interest rates. If your credit score falls into the “bad” category, you can expect the APR to be somewhere between 20% and 50%. Remember to read your contract carefully, and ask the lender questions to ensure you have full understanding of the cost of your loan, and repayment terms.

Will a Bank Give Me a Loan with Bad Credit?

The biggest banks in Canada have tightened their credit-issuing requirements. If you have bad credit, it will be difficult to get a loan from the big banks.

There are still many reputable lenders that will offer bad credit loans. The unfortunate reality is that the banks are not among these lenders.

Where Does Offer Loans for Bad Credit?

There are many providers within Canada that offer loans for bad credit consumers; the list at the top of this page highlights some of the most trustworthy of these loan companies. Not every lender will work with every borrower, as each person’s situation is different, and each lender may have their own set of eligibility criteria. But in general, bad credit is not a barrier to approval for the companies named above.

Can I Trust Lenders Offering Bad Credit Loans with No Credit Check and Guaranteed Approval?

Generally speaking, you should be careful with personal loans in Canada with no credit check. There are some lenders who don’t check your credit and (almost) guarantee approval that are reputable.

If you want to find a lender that doesn’t check your credit score, go with a trusted option. The online world may contain dangerous loan-related scams, so you should be suspicious of lenders with unverifiable reputation. Legitimate lenders will never ask you to pay upfront for a loan. They will also never ask you for personal information before you’ve sent an application.

If a lender doesn’t ask you any of the above and is an accredited, legitimate business, you won’t have any problems. With basic due diligence, finding a trustworthy lender is not difficult.

What’s a Direct Lender?

A direct lender is any loan provider that provides financing to consumers, without the aid of a third party or intermediary. Just like the companies mentioned above!

How Do I Find Out If I Have Bad Credit?

Finding out your credit score is easy; anyone can request their full credit history at any time from one of Canada’s official credit bureau (Equifax or TransUnion). Or consumers can use a third party credit check company. When searching for loans in Canada, knowing your credit is an important first step in understanding your chances of approval and your potential interest rate.