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Borrowing money is something a majority of Canadians will have to do at one time or another. Whether you need some money for repairs after a car accident or need to make a large purchase like a home or a car in, sometimes we will need to spend money that we just don’t have.
While many people can go down to their local bank or credit union and borrow money relatively easily, this isn’t always the case. If you find yourself struggling with bad credit and a low credit score, it can make finding a loan more difficult. Difficult, but not impossible. Thankfully, there are plenty of lenders out there willing to offer bad credit loans in Moncton to the people that need them.
What is Bad Credit in Canada?
Knowing what constitutes bad credit can help you know whether or not you may need to be looking for bad credit loans in Moncton. Bad credit essentially means that you have a low credit score stemming from some credit or borrowing-related issues from your past. Having bad credit can impact many parts of your daily life making it hard to buy a car, rent an apartment, or buy a home.
In Canada, credit scores range from 300 to 900. The higher your credit score, the less risk you pose to a lender, and the better loans and rates you will have access to. As your score dips lower, you will find that borrowing might be a little more difficult and expensive. There is no widespread definition of what bad credit is, but it is generally seen as a score of less than 560.
Of course, bad credit can also mean different things for different types of people. For example, someone who is used to a score of 750 will think a score of 600 is bad. But someone who has had a score in the 400s for years will think that the same score of 600 is great.
The Credit Score Ranges in Canada
While you now know what bad credit is and the credit scores that Canadians can have, there is a lot more you need to know about credit scores before we look at bad credit loans in Moncton. For example, you need to be aware of the credit score ranges in Canada. These can help you quickly identify how you are doing credit-wise.
The range of credit scores in Canada are:
- Poor – 300 to 559
- Fair – 560 to 659
- Good – 660 to 724
- Very Good – 725 to 759
- Excellent – Over 760
These ranges aren’t set in stone and officially recognized, but they can give you a good idea of where you stand. Also, it is important to keep in mind that Canada has two credit bureaus (TransUnion and Equifax) and each may have a different credit score for you, so don’t be alarmed if they don’t match up exactly.
In addition to knowing this, it is also a good idea to learn what factors go into deciding your credit score. These include:
- History of payments
- Credit length or history
- Credit utilization
- New inquiries
- Credit diversity
For example, your score will only get better if you make your payments on time and in full, while it will drop if you are constantly overspending and having your credit pulled by multiple creditors and lenders. Being aware of these factors will help you ensure that you always keep your credit score as high as possible, to make borrowing money easy and affordable.
What are bad credit lenders looking for when they approve a loan?
What are the Causes of Bad Credit in Moncton?
Bad credit loans in Moncton can be used by a wide range of people for a wide range of reasons. This is because there are many different causes of bad credit. One of the biggest causes and reasons for people to have bad credit is simply spending irresponsibly and using credit too often.
Some people overspend with their credit card and then when it comes time to pay their bills, they are unable to do so. These types of bad financial habits can be hard to break, and getting out under a mountain of debt with these bad habits can be even more difficult.
However, this is far from the only reason for bad credit. It would be unfair to assume that everyone who has bad credit got there by being irresponsible. There are plenty of other reasons why someone could find themselves with bad credit.
They could have lost a job, suffered a medical or financial emergency or had some other catastrophic events take place. So before automatically assuming someone with bad credit deserves no sympathy and is at fault for their position in life, be sure to consider the alternatives.
Types of Loans Available to Those With Bad Credit
Finally, let’s begin to take a look at the types of bad credit loans in Moncton that are available to you. The first type of loan you can get is loans from lenders that don’t check credit. These lenders will be willing to work with anyone, and won’t be bothered that your credit is bad. While easy to get, these loans will often come with fairly high-interest rates and relatively strict terms.
Another option is a secured loan. If you put an asset of yours up as collateral, it can reduce how much risk you pose to a lender. This means they might be willing to work with you even if you have bad credit. A secured loan can also get you access to a better interest rate than you will likely find anywhere else.
If you do indeed opt for a secured loan, you need to be careful. If you end up defaulting on that loan and become unable to pay it off, the lender could seize your asset in order to make back some of what they have lent you. As a result, only borrow an amount that you are confident you can pay back.
Be Wary of Loan Scams
While there are indeed some great loan options out there for those with bad credit, unfortunately, there are also predatory or fraudulent lenders that all consumers need to be aware of. Loan scams will often target those with bad credit as these people often have nowhere to turn. Watch out for guaranteed approval, upfront payments, trying to get you to lie, or forcing you to act fast.
Loan scams are getting more and more advanced, so you need to be more careful than ever. If a loan or lender makes you uneasy in any way, it is a good idea to simply walk away and continue your search.
How to Improve Your Credit
Some people are comfortable working with bad credit loans in Moncton, but others would rather improve their credit and be able to qualify for standard loans. Thankfully, improving your credit is not only possible but very attainable. Some of the things you can do to easily increase your credit score include:
- Ensure all credit card payments are made on time and in full
- Keep your credit utilization fairly low (generally under 30%)
- Don’t constantly apply for new credit
- Keep old credit accounts open
- Spend responsibly and develop good habits
While these tips will help with your credit, it is important to remember that they are not magic. They won’t transform your credit from bad to excellent overnight. It can take some time, and a lot of sacrifices, in order for you to see your credit improve. Even still, it is worth it to try and improve your credit to gain access to better and better loans.
Credit Improvement Products Available in Moncton
While some people can easily improve their credit to have access to more loans than just bad credit loans in Moncton, that isn’t always the case. Some people will struggle to build up their credit for one reason or another. If you are struggling to improve your credit on your own, rest assured that there are some options for assistance.
Secured Credit Card
A secured credit card is a credit card that requires a cash deposit from the cardholder. This is essentially collateral that provides the lender with some protection if the individual can’t pay off their bill. Using a secured card will allow you to build credit, without the inherent risk that comes along with using a standard credit card.
Taking out a small installment loan and paying it off over time can also help increase your credit score fairly quickly. Of course, the loan should be small enough that you have no trouble paying it back. If you can’t pay back this loan, it will end up having the opposite effect on your credit.
Credit Rehab Savings Program
The credit rehab savings program is a great option for those who not only want to improve their credit but also save money at the same time. The plan works by taking out a loan and making payments. The payments are held in GIC until you’re done paying off the loan at which time you’ll gain access to the money (minus and fees). Your credit score will also benefit from all your on-time payments which were reported to the credit bureaus.
Any of these options should be able to help you build up your credit safely and successfully over time. If you are not sure which is the right option for you, be sure to ask a professional or trusted expert for their input.
Helping You Find a Great Bad Credit Loan
Whether you want to learn more about bad credit loans in Moncton, or are interested in finding one in your area, be sure to reach out to us at Loans Canada. We will be able to help you out and answer any questions that you may have.