The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
What Does “Any Credit Accepted” Really Mean?
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Credit scores can have a significant impact on a person’s ability to secure a loan. This number shows lenders, landlords, service providers, and insurers the probability of whether or not a consumer will make their payments on time. Typically, the higher a credit score is, the better an individual is at paying off their debts. Although keep in mind that, your credit is just one piece of the puzzle. Lenders, creditors and other providers look at a variety of factors when deciding to approve you for a new service or product.
Can Borrower’s With No Or Low Credit Get A Loan?
Those with no credit score or a bad credit score can still access credit, but lenders may view them more cautiously. Lenders compensate for the potential risk offered by these borrowers by charging higher interest rates on the credit they offer. Banks and other traditional financial institutions may refuse to lend to those who have no credit score or a bad credit score, so these borrowers must turn to alternative lenders – who claim to accept “any credit” for a loan.
Are “Any Credit Accepted” Loans Real?
“Any credit accepted” loans do exist. These loans are issued by nontraditional lenders to people who have no credit, little credit, or bad credit. Although these lenders may still review your credit history, they usually won’t make a decision to issue you a loan purely based on your credit score.
Even if these lenders do not make a decision purely based on your credit, they will often look at other financial factors to determine your eligibility for the loan:
Income And Expenses
You are more likely to be approved for an “any credit accepted” loan if you have an income high enough to cover the loan. Lenders will view you as someone who can pay the required loan payments every month.
Of course, your high income doesn’t matter if you have high expenses too. Your debt-to-income ratio will also be assessed in addition to your income. Lenders will want to ensure that you are financially able to afford the loan and your current debt obligations.
Employment History And Stability
Another aspect that is often evaluated by lenders is your employment history. Lenders will check this to see if your employment is stable enough to see the loan through. If you have an unstable employment history, you may not be able to afford the loan later on. While some lenders may still approve you despite your job instability, they may offer you a shorter loan term and a higher interest rate.
Secured loans can be a good option for consumers who are struggling to get approved for the loan they need. Certain lenders will accept an asset (typically a vehicle or something of value) as collateral. While secured loans do come with some risk, you may lose your asset if you default on your loan, they can help increase approval chances.
You are more likely to be approved for a loan if the amount is low and the term is short. You are viewed as less of a risk to the lender because you have to pay a smaller amount and because you have to pay the loan off quickly.
You may still be approved for an “any credit accepted” loan if the lender does not look favourably on these financial factors, but the loan’s interest rate will typically be higher.
Types Of “Any Credit Accepted” Loans
There are many types of “any credit accepted” loans. The most popular may be payday loans as they generally don’t require any credit checks. Auto title lenders also don’t usually require credit checks as the loan is secured with the title of your car. Your could also get a personal loan with bad or no credit with certain alternative lenders. However, before applying with any of these lenders, it’s important to understand how each loan works and which one would best suit your needs.
A payday loan is one of the easiest but riskiest loans to get. They have very low requirements and can provide funding within the day. However, they have very short terms and extremely high-interest rates. They also charge high penalty fees for late-payments and NFS charges. It’s also known for trapping people into a cycle of debt due to its unfavourable terms and high fees. It’s recommended that you only use this option when you have no other choice.
Auto Title Loans
Auto title loans are short-term loans that are secured by your car. These loans are also easy to qualify for but rates can be expensive. Moreover, if you default on your loan, you could lose your card.
There are many alternative lenders in Canada who offer personal loans to those with bad credit. These lenders are usually better than payday and auto title lenders because they offer better terms and rates. Moreover, unlike a payday loan, a personal loan can help cover much bigger expenses.
|Types of Loan||Funding Time|
|Up to $10,000||43%||36 - 60||Guarantor loan||With 24 hours||More Info|
|Up to $1,500||15% - 23%||-||Payday loan||Within 24 hours||More Info|
|$500 - $750||28% - 34.4%||3||Short-term loan||Same day||More Info|
|$100 - 10,000||-||6 - 60||Line of credit||Within 24 hours||More Info|
|$1,000 - $15,000||46.93%||12 - 60||Personal loan||Within 24 hours||More Info|
Advantages And Disadvantages Of “Any Credit Accepted” Loans
Like any kind of loan, “any credit accepted” loans have their advantages and disadvantages.
- Easily Accessible – You are almost guaranteed to be approved for an “any credit accepted” loan no matter your credit.
- Convenient – “Any credit accepted” loans are convenient because you can get the whole process, from applying to being funded, done online.
- Helps Build Credit – Like any loan, “any credit accepted” loans can help to build your credit if your lender reports to a credit bureau and if you make your payments on time.
- Simpler Underwriting Process – “Any credit accepted” loans take only minutes to approve, and you can receive your funds the same day.
- More Expensive – Because almost anyone can get approved for these loans, lenders often compensate for the risk by offering higher interest rates.
- More Likely Encounter Predatory Lenders – These loans have become more heavily regulated in the past few years, but predatory lenders are still out there. These types of predatory lenders often try to charge hidden fees and extra costs on top of high-interest rates and try to push their ”loans” onto unsuspecting borrowers.
Although there are “any credit accepted” loans that are legitimate, there are times when they should still be viewed with suspicion. Lenders often charge high-interest rates because of the potential risk that borrowers with low credit may pose.
It’s always a good idea to try to get approved for a loan by a bank or other traditional financial institution first, as they offer more competitive rates. If they don’t approve you, make sure to do your due diligence on any lender offering “any credit accepted” loans. Compare the interest rates offered by these lenders, read reviews about these lenders, and carefully read the terms and conditions of the loan so that you are not stuck paying a lot more than you thought. If you do your due diligence, you can protect yourself from predatory lenders.
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