Compare bad credit personal loans in Canada: Secured and unsecured
If you’re one of the 1 million Canadians with bad credit, you probably know first-hand how it can disrupt every area of your life. But there are options! Read on to find out about the best bad credit loans in Canada.
If you have bad credit, you probably know first-hand how it can disrupt every area of your life. From getting approved for a credit card, applying for a mortgage, renting an apartment, or even getting a job, having bad credit makes even the most important tasks difficult. We’ve scoured the market and put together a list of our recommended bad credit loans and lenders in Canada. Keep reading for more information about each lender further down in this article.
Comparison of the best bad credit loans 2023
Getting a personal loan when you have bad credit isn’t easy. Many lenders won’t approve you for a personal loan if you’ve made choices that have resulted in bad credit, bankruptcy, or defaulted loans, but there are still options out there. Here’s our list of the top recommended bad credit lenders, and there is more information about each lender further down in this article.
| Loan provider | Fast facts | Get started |
|---|---|---|
| Loans Canada | Unsecured loan amounts from $500 to $50,000 and APRs from 1.99%-46.96% | Apply now |
| LoanConnect | Unsecured loan amounts from $500 to $50,000 and APRs from 6.99% to 46.96% | Apply now |
| Consolidated Credit (credit counselling services) | High interest debt? Get the support you need. | Speak with someone |
Bad credit loan lenders
If you have bad credit, you’ll need to turn to bad credit lenders – private lenders for personal loans. The main difference between bad credit lenders and banks is that banks tend to only lend money to individuals with a good to excellent credit rating, whereas bad credit lenders take a much wider range of factors into consideration between deciding whether to loan you money. There are a few key differences in how banks and bad credit lenders will approach your loan application:
- Some Canadian bad credit lenders will offer loan approval even if you’ve had a bankruptcy, defaulted on a loan, or been in a consumer proposal. These money mistakes are usually no-go’s for banks.
- Some bad credit lenders will approve you for a bad credit loan without a credit check. Instead, they’ll take other factors into account when approving your loan, like your debt load and your income. A traditional lender like a bank will always check your credit score and will deny your loan even if you prove that you can pay it off.
- You may pay higher interest rates when you apply for a bad credit loan than a bank.
Unsecured bad credit loans
An “unsecured bad credit loan” means that you don’t have to use any collateral (like a home or car) as security for the loan. So, you won’t be putting your property or possessions at risk if you default on payments. If you have bad credit, getting an unsecured loan can be tricky, but not impossible. If you can provide a guarantor/co-signer with a good credit rating, many of the best bad credit loan lenders will likely approve your application. Here are our top choices for the best unsecured bad credit lenders in Canada:
Loans Canada
To apply for a loan with Loans Canada you need to be the age of majority within your home province, have proof of employment, and be either a Canadian citizen or have permanent residence. Loans Canada doesn’t offer loans itself, but rather, works like a search directory to help you find the best loans, maximum loan amounts and interest rates vary greatly. That being said, this company prides itself on being able to find the best loan option based on your needs and location, making it a good place to look for those with bad credit.
LoanConnect
If you’re over the age of majority and a Canadian citizen, you qualify to apply for a LoanConnect loan and borrow between $500 to $50,000. LoanConnect promises to give you a reply about your application immediately and connect you with lenders who can provide you with funds within 24 hours of submitting your application. LoanConnect accepts applicants with bad credit, those in a consumer proposal, and those with bankruptcies on their credit reports.
Secured bad credit loans
A “secured bad credit loan” means that if you have collateral like home equity, a car, jewelry, or other valuable items, you can use it to secure a loan and obtain a lower interest rate. The downside to secured loans is that if you can’t make your payments, your lender can seize your collateral as payment. Lenders can issue secured loans to customers with both bad and good credit ratings, as the advantages are larger loans and a lower interest rate.
Credit counselling
Got high-interest debt and not sure where to start? A non-profit credit counselling organization can be a good place to figure out your options.
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A registered non-profit organization, Consolidated Credit has helped more than 500,000 Canadians in the last 10 years get out of debt faster. You can consult with a trained credit counsellor, who will review your finances and help you understand your options — free of charge. Your credit counsellor can help you explore whether a debt consolidation loan is the best option or look at other avenues for relief to avoid bankruptcy. If you’re eligible for a debt management program, Consolidated Credit will contact your creditors and work with them to lower your interest rates and stop late fees. Using this service, you could be out of debt in as little as 36 months.
Benefits of obtaining a bad credit loan
While bad credit loans in Canada have high-interest rates, there are some benefits to obtaining one.
- Improved credit score: The best way to rebuild bad credit is to prove you can repay loans reliably. Applying for a bad credit loan and making your repayments on time will demonstrate to future lenders that you are a trustworthy borrower, and your credit score will improve.
- Better interest rates: When you have bad credit, the lowest interest rates on loans will not be an option. But bad credit loans in Canada can have better interest rates than their expensive cousin – the payday loan – which has interest rates up to several hundred percent.
- Borrow big sums: If you need to borrow a large amount of money quickly, a bad credit loan is a better option than several smaller loans from a payday loan company or spreading the debt across several credit cards (which can have interest rates of 18% or higher). Bad credit loans are available in amounts up to tens of thousands of dollars.
Bad credit personal loans with no credit check
If your credit score is very low (or non-existent), it might be worthwhile to seek out a lender who will approve your loan with no credit check. In this case, your lender will use other information to determine whether you can pay off your loan, so be ready to answer some questions about your finances.
Avoid payday loans at all costs, as you’ll get trapped in a cycle of payday loans because of the sky high-interest rates. Instead, consider applying for a short-term loan (4 to 24 months): it typically doesn’t require a credit check and offers a more manageable repayment plan.
What to look out for when getting a loan with bad credit
There are many bad credit lenders in Canada, so when you are doing your research and choosing the right one for your situation, keep these factors in mind:
- Interest rates: The lower the interest rate, the better – so prioritize lenders offering reasonable interest rates. Make sure you check their maximum interest rate before applying for the loan and do the math on whether you can afford the payments with the interest rate they offer you.
- Fees: Some bad credit lenders require you to pay either a flat fee or a percentage of your loan amount. Read the fine print of your loan agreement to check for any of these possibly hidden fees.
- Penalties: If you miss a payment on your bad credit loan, you’ll usually pay a penalty. The same is true if you want to pay your loan off early or make a late payment. Get a clear understanding of the possible penalties before signing up for your loan.
- Credit reporting: A benefit of bad credit loans is that they report your regular payments to the credit reporting agencies in Canada, which in turn will boost your credit score. Make sure the lender you are considering reports your loan so that you can rebuild your credit score.
Final words
Getting a personal loan may be a hurdle when you have bad credit, but it’s not impossible. As long as you shop around for the best bad credit lender in Canada, you should be able to find the right lender. In fact, getting a personal loan and making regular payments can help you rebuild your credit in the long run. When used responsibly, getting a bad credit personal loan is the first step towards achieving an A+ on your credit report.
Jordann Brown is a freelance personal finance writer whose areas of expertise include debt management, homeownership and budgeting. She is based in Halifax and has written for publications including The Globe and Mail, Toronto Star, and CBC.
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