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There are so many instances where a loan would be required in Ontario. Whether you’re making a large purchase or simply need extra funds to cover the cost of an expensive bill, loans can really come in handy. But what if you have bad credit? Can this impede your ability to secure a loan? Luckily, there are bad credit loans in Ontario that are available for consumers with bad credit scores, making loan approval possible.
For some more information about loans in Ontario, click here.
What is Bad Credit?
Bad credit basically means that you have a low credit score. More specifically, credit scores under 650 are considered substandard and will make qualifying for a traditional loan more difficult, if not impossible. Even if you were to get approved for a loan with this credit score, you’d most likely be charged a much higher interest rate compared to borrowers in Ontario with a good credit score.
So how can bad credit affect your life? In many ways, in fact, including the following:
Getting loan approval will be difficult – As already mentioned, getting approved for a loan can be tough if you have bad credit. Lenders prefer to deal with borrowers in Ontario with high credit scores, making them less of a risk when extending credit. With a low credit score, your chances of loan approval are greatly diminished.
Higher interest rates and more restrictive terms – If you are able to get approved for a loan despite your bad credit, you can be almost certain that the interest rate and loan terms will be less favourable. That’s because lenders in Ontario will want to protect themselves from riskier borrowers in case they default on the loan.
Renting an apartment may be more difficult – If you’re looking to sign a lease on an apartment in Ontario, you may actually find yourself at a higher risk of getting turned down simply because of your bad credit. Much like lenders want to be sure that borrowers make their payments on time every month, landlords want to ensure that the rent is paid in a timely fashion. A bad credit score paints the picture of someone with a sketchy payment history, which is not what landlords want to see. Read this to learn how your payment history affects your credit score.
Getting a cell phone may be more of a challenge – Again, it all comes down to the odds of missing payments. With a bad credit score, cell phone providers will assume that you are at a higher risk of missing your monthly bills. In some cases, consumers in Ontario may be turned down for a cell phone contract because of their bad credit.
Do you know how your credit score is calculated? Find out here.
Types of Loans Available to Those With Bad Credit
Going into a loan application with bad credit isn’t ideal, but that doesn’t mean there aren’t any alternatives available. Bad credit loans in Ontario are available to those who don’t have a high credit score and are therefore unable to get approved for a traditional loan.
Bad credit loans – There are many alternative lenders available in Ontario who deal specifically with bad credit borrowers. Rather than focusing a great deal on a person’s credit score, these lenders in Ontario place more weight on other factors, such as income and debt levels. If your credit is poor, getting a bad credit loan in Ontario might be your only option.
Want to know what bad credit lenders look for when assessing loan eligibility? Look at this.
That said, it is important to be careful not to continue a vicious cycle of debt, especially since these loans typically come with very high-interest rates. Make sure that taking out a bad credit loan is worth it for your situation.
Peer-to-peer loans – These types of loans involve borrowing funds from peer-to-peer lending entities. These websites allow borrowers in Ontario to get loans from individual lenders instead of from traditional banks. This type of lending is becoming an increasingly popular way to get a bad credit loan. That said, these websites still have certain criteria that borrowers need to meet. You’ll pay a lower interest rate compared to credit cards, but the qualifications for borrowing may be much more strict.
Secured loans – Any loans that require collateral are known as “secured loans,” and they’re more common among those with bad credit. Collateral is often required for borrowers with bad credit in order to provide with the lender with some insurance in case the borrower defaults on the loan. By backing the loan up with a valuable asset, borrowers in Ontario with bad credit may be able to secure a loan much easier.
Frequently Asked Questions
How will bad credit affect my ability to get a loan?
Bad credit doesn’t just affect your ability to qualify for a loan, but it also affects the rate your lender will charge you and the loan amount they approve you for. Moreover, in particular, getting a loan from a bank when you have bad credit is very difficult, if not impossible.
Are payday loans my only option if I have bad credit?
No. There are many alternative lenders in Ontario whose entire business model revolves around providing loans to individuals with subpar credit. Whether you need a personal loan, a line of credit or even a mortgage, there is a lender out there for you. You simply need to ensure that your current financial health is in order. This means that you have a steady source of income and a good debt to income ratio.
How do I get a lower interest rate with bad credit?
There are a few ways you can lower your interest rate despite having bad credit. For one, researching and using loan comparison websites can help you compare rates and get quotes from different lenders. Secondly, you can reduce your interest rate by improving your current financial status by taking a second job to increase your income or by paying off a couple of debts to better your debt-to-income ratio. Lastly, you can increase your creditworthiness by securing your loan with an asset or by getting a cosigner.
Get the Bad Credit Loan You Need
If you have credit that’s subpar, your only option may be to apply for a bad credit loan in Ontario. Before you apply for a loan, make sure to pull your credit report to see what your score actually is in order to make sure you opt for the appropriate product. To find the best bad credit loan for you, be sure to contact Loans Canada today.