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Life can be unpredictable, especially when it comes to your finances. One day you’re on top of things and the next day a financial emergency arises, drains your savings, and causes you to struggle with debt. That debt can cause a chain reaction that leads to bad credit, which pushes a lot of traditional credit products in Winnipeg out of your reach.
However, if you’ve got bad credit, don’t feel ashamed. There are plenty of other Winnipeg residents that experience similar situations every day. And, while some products may be out of reach, you may still be able to access a bad credit loan.
Take a look at this infographic for everything you need to know about your credit score.
What Does Bad Credit Even Mean?
In Winnipeg and Canada, in general, credit scores range from 300-900 and are often used as a representation of your credit health. The further your score falls toward the 300 mark, the worse your credit health ends up being. Generally speaking, bad credit means that your credit score has fallen within the 300-560 range.
Credit Score Breakdown
To have a better idea of where your credit could use improvement, it’s beneficial to know how your credit score is calculated. Pay attention to each of these factors:
- Payment History – 35%
- Debt Owed – 30%
- Length of Credit History – 15%
- New Credit Inquiries – 15%
- Types of Credit Used – 10%
Wondering why you have more than one credit score? Find out here.
What Are Some Common Causes and Results of Bad Credit for Winnipeg Borrowers?
Bad credit may be due to many things, including but not restricted to:
- A credit history filled with missing, short, and/or late payments
- Outstanding (unpaid) consumer and household debt
- Financial damage from scams, fraud, or identity theft
- A debt settlement or debt consolidation program
- A consumer proposal, personal bankruptcy, or other delinquency
- Loss of employment or unforeseen event that stops you from working
- A car accident, house fire, or another large-scale financial emergency
The Resulting Effect
As we said, you should still be able to get approved for a loan, despite your bad credit. However, many prime lenders in Winnipeg, such as banks and credit unions will consider you a risky candidate and may reject your applications because their borrowing regulations are quite strict. If you do get approved anywhere, the conditions of your loan will be less favourable than a Winnipeg borrower with good credit will receive.
This is due to the fact that any lender in Winnipeg and Canada, in general, can view your credit report and credit score when you apply, as a record of your credit transactions over a number of years will be held on file with both of Canada’s credit reporting agencies (Equifax and TransUnion). The more chance you have of not paying them back, the worse your approval results and potential interest rate will be. What’s more, a hard credit inquiry will be placed on your report and decrease your score every time a lender checks your credit. Since bad credit can lead to them to rejecting your application, you may end up with multiple hard inquiries, making your credit health even worse.
Check out this infographic to see how bad credit affects your daily life.
Where Can I Find a Bad Credit Loan in Winnipeg?
Made for borrowers who don’t qualify for traditional loan products, a bad credit loan can be applied for through alternative and private lending institutions in Winnipeg, as well as lenders that cater specifically to clients with bad credit.
Types of Loans You Can Get in Winnipeg With Bad Credit:
- Bad credit installment loans
- No-credit check loans
- Secured loans (using collateral)
- Guarantor loans (loans involving a cosigner)
Note: The reason that having assets as collateral (house, car, etc.) or a cosigner will help you get approved for a bad credit loan is that you’ll be offering extra security to your lender, thereby reducing the risk they’re taking on you. This added security will both increase your approval odds and lower your interest rate.
How a Bad Credit Loan Works in Winnipeg
The average bad credit loan functions the same way as any other installment loan you would find in Winnipeg. You would first choose a lender and go through an application process to determine your creditworthiness. If approved, you’ll receive your loan via a lump sum deposited into your bank account, which you can use for whatever expenses that come your way.
For more information about the bad credit loan eligibility process, click here.
You’ll then pay the loan back through a series of divided installments over a payment period that you and your lender will agree upon beforehand. Once the loan is fully repaid, you’ll hopefully have improved your credit health to the point when you’ll no longer need to apply for bad credit products.
Considerations to Make Before You Apply For a Loan in Winnipeg
Be careful, bad credit loans themselves come with a few side effects that you should consider before you apply, such as:
- Lenders consider you riskier when you have bad credit. As a result, they will give you a higher, less affordable interest rate for your payments.
- Your payment conditions may also be less favourable. You may not be able to adjust your payment plan or payment amounts after the contract has been signed, whereas someone with good credit might have that ability.
- Missing payments or defaulting in some other way will result in even worse damage to your credit, decreasing your approval chances and making any future interest rates even higher.
- Having bad credit can cloud your judgment and make you desperate to get approved. Scam artists and identity thieves are aware of this and may establish fake lending companies in order to steal from you. Always research your bad credit lender properly before you give them any personal or financial information.
How To Identify a Loan Scam
Alternatives Available in Winnipeg
As beneficial as a bad credit loan can be, it’s understandable if you’d rather seek an alternative, given the considerations above. In that case, you might have to take measures to improve your credit before you apply, including but not limited to:
- Start budgeting properly and reduce your unnecessary expenses
- Get a free yearly copy of your credit report and check it for common errors
- Also, check your report for signs of fraud or identity theft
- Fix your credit history (responsible payments for your existing products, if any)
- Use your home equity to consolidate outstanding high-interest debt
- Apply (and make responsible payments) for a secured credit card
- Apply for a credit rehab savings program
Seeking Help From Loans Canada
If you’re looking for a bad credit loan or credit improvement solution in Winnipeg, you can rest easy knowing that Loans Canada is on your side. We can refer you to the best bad credit lenders in your area. Apply today!