Taking out loans is something most of us will need to do at some point in our lives. If you have high credit scores, securing a loan is often not a problem at all. Unfortunately, things can happen that can lower our credit scores. Whether it’s missed payments, carrying too much debt, or anything else in between.
If you have low credit scores, you might be wondering if it eliminates you from being able to get a loan in Canada. Thankfully, it doesn’t. There are bad credit loans that are accessible to all and some loans that don’t even require a credit check. So, what are these loans and how do you get them? This article will answer that question and many more as we take a closer look at how to get a loan with low credit scores.
As you can likely guess, a bad credit loan is a loan that is accessible to those who have bad credit. The term “bad credit” is subjective, but generally, bad credit scores range anywhere from under 300 up to about 559. Credit scores between 560 and 659 are considered fair, 660 to 724 are good, 725 to 759 are very good and anything above 760 is considered excellent.
Generally, bad credit can make it more difficult to get standard loans from banks or other more traditional lenders, as they will generally use your credit scores and credit report as one of the biggest indicators of your creditworthiness. So if your credit scores are low, they might not consider you.
However, there are many alternative lenders for people with low credit scores to choose from. While it’s easy to get approved with these lenders, they often charge high-interest rates and fees which can make the loan very expensive.
There are many different types of bad credit loans in Canada, including the following:
Many lenders will offer standard personal loans to those who have bad credit. While it may not be possible to do with a big bank, many personal loan lenders offer up to $35,000 or more. Interest rates on these types of loans are often higher, ranging on average from 3% to 46.97%. Legally, no lender can charge you more than 60% annually.
Another option you can choose is a secured loan. These will often have lower rates, but you will need to put some form of security, typically your home, a piece of property, or your vehicle as collateral. However, these are quite risky as you could potentially lose your home or vehicle or if you default on your loan.
If you don’t have any collateral to offer, but you’d still like to avoid the high-interest rates that come with an unsecured loan, you can also apply for a guarantor loan. Here, your credit would not typically be a factor. Instead, you’ll need to seek the help of a co-signer, someone with better credit and healthier finances, and who would willingly take on the responsibility of your payments in the event that you can’t afford them.
Having a guarantor on your side can be extremely beneficial, because this will allow you to access a loan without your own credit being checked (the co-signer’s credit will be checked instead), but you’ll still be able to build and improve your credit as long as you’re making payments on time and in full.
Of course, another option is to go with a payday loan, but this should really be the last option for most people. These are often seen as predatory as they are designed for people who have bad credit. Sure, they can get you money incredibly fast and are a decent option if you need emergency money quickly, but these often come with extremely high-interest rates and very short terms. So be sure to think of other options before you agree to go to a payday lender for your loan.
Getting a credit card with a credit score of 450 can prove difficult. Most lenders require average to excellent credit. However, there are other options available, you can get a secured credit card instead. These cards work just like regular credit cards, except they usually don’t come with the same rewards or perks as one. Instead, they allow you to build your credit scores until you can switch to a regular credit card. Secured cards are easy to qualify for, they simply require you to provide the minimum security deposit, which will also act as your credit limit.
| Annual Fee | Interest Rates | Min. Deposit | |
| Neo CardTM (Secured) | $0 | 19.99% – 26.99% | $50 |
| Plastk Secured Visa Credit Card | $48 (+$6 monthly fee) | 17.99% | $300 |
| Home Trust Secured Visa Card | 0$ or $59 | – 19.99% (no annual fee) – 14.9% (with annual fee) | $500 |
| Capital One Guaranteed Secured Mastercard | $59 | 19.8% | $75 |
Many online lenders that offer bad credit loans don’t pay any mind to your low or bad credit, instead, many of them will look at your income, debt level, and job stability to determine your creditworthiness. They may also look at your overall financial health, life situation, and reason for the loan to help them in their decision-making process. Additionally, if you go with a secured loan, they’ll assess the value of your asset, whether it’s your car or house.
Just like a standard loan, you can use a bad credit loan for anything you need. Whether it is for an emergency, a car repair, to cover this month’s bills or anything in between, a bad credit loan is a versatile credit product that can help cover any cost. Keep in mind, just because it’s possible to get a loan when you have bad credit, doesn’t mean you should. Regardless of your credit, loans can be expensive and you should only get a loan if you need it and not just to have some extra cash kicking around.
No matter your financial situation, emergencies can pop up and throw life into a financial mess. In cases like these, loans can be extremely helpful as they allow you to cover the expense without having to pay the entire amount upfront. Unfortunately, bad credit can sometimes disqualify you from getting approved for certain types of loans.
Many Canadians with bad credit rely on alternatives lenders who specialize in working with bad credit borrowers to get the loans they need. While bad credit loans can be expensive, these can often also help you rebuild your credit.
One of the better ways to improve your credit is to show that you can handle credit responsibly and pay your bills on time. Here are some ways to help you improve your credit scores:
Even with a less-than-perfect credit score like 450, you can still get a loan. While these bad credit loans may be more expensive, they are easily attainable from many different lenders. Moreover, they can actually help you raise your credit scores, which can help you access credit in the future.
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In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post, LoansCanada.ca, and ReboundFinance.com. Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.
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