Announcing The Winner of Our Financial Literacy Scholarship (Spring 2022)
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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.
Bad credit can be difficult to understand, especially if you’ve just started using credit products. Here’s an example of how credit works:
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.
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:
Amount | APR | Term (months) | Type of Loan | ||
![]() | Up to $35,000 | 26.99% - 39.99% | 6 - 60 | Secured & unsecured | More Info |
![]() | Up to $15,000 | 29.99% - 46.96% | 9 - 60 | Personal loan | More Info |
![]() | $5,000 - $35,000 | 5.9% - 45.9% | 12 - 60 | Personal loan | More Info |
![]() | $1,000 -$35,000 | 5.99% - 29.19% | 36 - 60 | Persona loan | More Info |
![]() | Up to $5,000 | 19.9% - 45.9% | 3 - 36 | Personal loan | More Info |
![]() | Up to $10,000 | 43% | 36 - 60 | Guarantor loan | More Info |
![]() | Up to $3,000 | 22% - 35% | 3 - 4 | Installment loan | More Info |
![]() | $1,600 - $25,000 | 9.47% - 20.07% | 36 - 60 | Secured Savings Loan | More Info |
![]() | Up to $20,000 | 19.44% - 31.90% | 36 - 84 | Consumer Proposal Exit Loan | More Info |
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:
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.
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:
However, bad credit loans may not be as appealing as bank loans because:
Check out the difference between getting a personal loan and a payday 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:
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.
Before you apply for a bad credit loan, it’s also extremely important to think about and budget for the associated costs, such as:
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:
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:
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:
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.
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