Best Bad Credit Loans 2022

Best Bad Credit Loans 2022

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated December 9, 2021

Once you become a credit user, a world of possibilities can open up to you, such as the ability to mortgage a home. That said, if you’re not careful, it’s easy to end up with bad credit, which can wreck your finances and prevent you from getting approved for any credit products, including loans.  

What is Bad Credit?

Bad credit can be difficult to understand, especially if you’ve just started using credit products. Here’s an example of how credit works:

  • When you use your first credit card, your provider will begin reporting your payment activity to Equifax and/or TransUnion, Canada’s credit bureaus.
  • Each bureau will create a slightly different credit report in your name. This document contains all your credit-related actions over the past few years. 
  • You will also be assigned a 3-digit credit score ranging from 300 to 900, which summarizes how healthy your credit is. 
Credit score

What Happens When You Have Good Credit?  

If your score is in the “good” range of 660 – 900, it’s generally because you’re a responsible borrower. As such, lenders will assume you’re more likely to pay your debts on time, so it will be easier for you to get approved for a large amount of credit, a low interest rate, and an appealing payment plan.

What Happens When You Have Bad Credit? 

If you haven’t been paying your previous debts responsibly, your credit score can quickly fall into the “bad” range of 300 – 600. By checking your credit history, lenders can also see every payment you’ve missed over the past few years. As a result, they will consider you more of a liability, so you may only qualify for a small amount of credit, a high interest rate, and a restrictive payment plan.  

Unfortunately, while late or missed payments are the fastest ways to decrease your credit score, there are a few other events that can lead to bad credit, such as: 

  • Uncorrected errors on your credit report (wrong name, address, etc.) 
  • Having your identity, credit card, or banking information stolen
  • Moving without informing your lender(s) of your new address
  • Having too much revolving debt on your credit card or line of credit
  • Applying for credit too often (every time a lender checks your credit, a hard inquiry will appear on your report and decrease your score slightly)

Best Bad Credit Loans in Canada 2022

Type of Loan
FairstoneUp to $35,00026.99% - 39.99%6 - 60Secured & unsecuredMore Info
easyfinancialUp to $15,00029.99% - 46.96%9 - 60Personal loanMore Info
Mogo Finance$5,000 - $35,0005.9% - 45.9%12 - 60Personal loanMore Info
Borrowell$1,000 -$35,0005.99% - 29.19%36 - 60Persona loanMore Info
Loan AwayUp to $5,00019.9% - 45.9%3 - 36Personal loanMore Info
Lending MateUp to $10,00043%36 - 60 Guarantor loanMore Info
514 LoansUp to $3,00022% - 35%3 - 4Installment loanMore Info
Refresh Financial$1,600 - $25,0009.47% - 20.07%36 - 60Secured Savings LoanMore Info
MarbleUp to $20,00019.44% - 31.90%36 - 84Consumer Proposal Exit LoanMore Info

How Do Bad Credit Loans Help You?

Essentially, a bad credit loan is a lump sum of money that you can borrow from various lenders in Canada. That sum is normally deposited directly into your bank account and you would repay it through divided installments. Unlike some traditional credit products, a bad credit loan can help you:

  • Get approved for credit with few requirements, even with weaker finances
  • Cover your expenses during unemployment or other financial emergencies 
  • Gradually build good credit when you make full payments on time 

Despite all these benefits, you should always research and compare a few lenders in your area before applying for a bad credit loan. That’s because every lender offers different loan amounts, interest rates, payment plans, and approval requirements.

Check out why a payday loan is considered a bad credit loan.

Bad Credit Loans vs. Bank Loans

That leads us to our next subject; how bad credit loans differ from traditional loans that you would acquire from a bank. Actually, most banks don’t even offer bad credit loans because their lending policies are more restrictive, often preventing them from approving people who don’t have good credit or a decent income.  

So, you’ll most likely have to apply with an alternative lender or a subprime lender that specifically advertises as bad-credit-friendly. These bad credit lending sources can be more appealing than banks and other prime lenders because:

  • You can create an account, apply, and make payments 100% online
  • Applications are simpler and loan funds can be deposited faster
  • They have easier loan requirements and better approval rates
  • They focus on your income and other factors, rather than just your credit
  • Many of them don’t even check credit prior to approval

However, bad credit loans may not be as appealing as bank loans because:

  • Interest rates and fees are usually higher
  • Loan amounts may be smaller and payment plans more restrictive
  • Private lending companies are harder to regulate, leading to a higher possibility of scamming, fraud, and illegal rates

Check out the difference between getting a personal loan and a payday loan.

What You Can Do to Qualify For a Bad Credit Loan

Besides researching your lender properly, there are a few things you can do to get approved for the best bad credit loan in 2022, such as:

  • Have a full-time job for at least a few months
  • Increase your income and save up as much as possible
  • Consolidate your current debts to lower your debt-to-income ratio
  • Offer an asset (vehicle, real estate, etc.) as collateral for a secured loan
  • Find a stronger borrower to cosign your application

While requirements may vary from lender to lender, you’ll have an easier time qualifying for a larger bad credit loan, with a more affordable interest rate and repayment plan when you have the ability to pay your debts on schedule. The less risky your lender considers you, the better the result. 

Costs to Consider When Taking Out a Bad Credit Loan

Before you apply for a bad credit loan, it’s also extremely important to think about and budget for the associated costs, such as: 

  • Interest – What your lender charges to borrow from them. The lower your interest rate is, the cheaper your loan will be. However, bad credit lenders often charge higher rates because they are taking on riskier clients. 
  • Fees – All too often, borrowers don’t think about the fees their lender could charge, whether they are for each payment or a one-time cost. These fees can include loan origination, preparation of documents, and other administrative services.
  • Penalties – If you pay your loan installments on time, then you shouldn’t have to worry about penalties. Unfortunately, every late, incomplete, or missed payment will lead to a penalty fee, as well as added interest. 
  • Term – The length of your loan term, as well as the size and frequency of your payments, are also important. While smaller payments and longer terms can be more affordable, larger payments and shorter terms can lead to less overall debt.

Risking Your Assets or Cosigner

It’s also essential to think about what it could cost you to apply for a secured or guarantor bad credit loan. While offering collateral or having someone cosign your application can lead to better rates and loan conditions, there are also two major risks that come with these options: 

  • Secured Loans – When you offer an asset as collateral, your lender will temporarily own it until your loan is fully paid. So, if you default on too many payments and don’t negotiate the situation, they will have the right to seize your asset and sell it to cover your debt. 
  • Guarantor Loans – By co-signing your application, your guarantor is agreeing to cover your payment(s) if you can’t afford to. If they end up responsible for your payments but also cannot afford them, they could be subject to the same penalties and credit damage as you would if they were still your responsibility.   
How Does Bad Credit Affect Daily Life?

Pros and Cons of Bad Credit Loans

Bad credit loans can be beneficial when you’re in need. That said, there are also many drawbacks associated with them that you must consider. Check out these pros and cons of bad credit loans before you give away any information:


  • Easier approval requirements
  • Faster application and depositing times than banks
  • Applying can often be done online
  • A credit check may not be necessary when applying
  • Responsible payments can gradually improve your credit
  • Helpful when covering daily costs and emergency expenses 


  • Higher interest rates, fees, and penalties
  • Smaller loan amounts and more restrictive payment terms
  • More chance of scamming, fraud, and predatory rates
  • Defaulting can result in penalties, extra interest, and loss of collateral
  • Every late, short, or missed payment damages your credit
  • If your cosigner defaults, both of your financial profiles could be at risk

Interested In Improving Your Bad Credit?

If the conditions of most bad credit loans seem unappealing, don’t worry, because there are a few techniques that can slowly improve your credit, including but not limited to:

  • Create a budget and reduce non-essential costs
  • Consolidate your existing unpaid debts
  • Check your credit report periodically for errors, fraud, and identity theft
  • Pay all your utility, cell phone, and internet bills on time
  • Use a secured credit card to make responsible payments 
  • Avoid applying for too many credit products within the same year
  • Increase your credit limit and don’t carry too much revolving debt
  • Avoid minimum or partial payments (this helps reduce interest)
  • Add variety to your credit accounts (but use them responsibly)

Bad Credit Loan FAQs

Can I still get a bad credit loan if I have a consumer proposal on my credit report?

Yes, there are many subprime lenders that will offer you a bad credit loan, even if you’ve gone through a consumer proposal, bankruptcy, or other debt management procedure. However, they may want you to be discharged before they’ll approve you. Additionally, you must watch out for the higher costs associated with these types of loans.

Should I get a secured or unsecured bad credit loan? 

Remember, a secured loan is when you offer an asset as collateral. The more valuable your asset is, the better your approval chances, interest rate, and loan conditions will be. That said, there is definitely more risk associated with a secured bad credit loan because defaulting can result in the loss of your collateral.  If you want to avoid that danger or don’t have any collateral, an unsecured bad credit loan may be a safer choice. In fact, most bad credit loans are unsecured. However, unsecured loans are typically smaller, have shorter terms and higher overall costs.

Do bad credit loans get reported to the credit bureaus?

Actually, some lenders don’t report to Equifax or TransUnion, so getting approved with bad credit is less of a problem. However, if you’re looking to improve your credit, you must apply with a lender that does. 

Searching For the Best Bad Credit Loan?

If so, Loans Canada can show you the way by connecting you with the best loans, lenders, and interest rates in your area. Submit a request today and get matched with a lender that meets your needs.

Rating of 5/5 based on 2 votes.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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