The Best Personal Bad Credit Loans in Canada
If you ever find yourself with a bad credit score, don’t just immediately turn to predatory loan sharks. In Canada, you can find legitimate and reputable personal lending companies that will loan you the funding you need. Taking ownership of bad credit can be difficult, but don’t worry because you’re not alone – over a million Canadians suffer from a low credit score. Whether it’s from missed debt repayments, defaults, or bankruptcies, life happens and financial situations change. In many cases, you can have bad credit just from being self employed with irregular income! While it’s true that poor credit can negatively impact financial product availability and lending rates, it’s not the end of the road in terms of borrowing money. To help you find guaranteed approvals for loans, we hand-picked a few of the most fair and respected personal lending companies from across Canada that offer this service.
After reviewing the top financial institutions that offer poor credit loans in Canada, we strongly recommend that you choose LoanConnect and LendingMate for your personal borrowing needs.
LoanConnect is Canada’s leading Personal Loan Search Engine. They offer clients different options for lenders regardless of where they fall in the credit range. Searching for loan deals using LoanConnect will not affect a user’s credit score. Any credit checks performed by associated lenders will be considered soft checks. If a hard check is required for any reason, you will be notified first so you can decide whether or not you want to proceed.
LendingMate offers loans from $2000 to $10,000 to individuals who have low/bad credit scores. The company does this without credit checks – instead, they ask clients to nominate a guarantor that is able to repay the debt as a fallback, in an effort to hedge against default risk. Simply by having an approved guarantor, LendingMate can offer you competitive lending rates since you’re automatically considered a trusted customer.
THE TOP PERSONAL LENDING COMPANIES FOR BAD CREDIT IN CANADA
Founded in 2016 and based in Toronto, LoanConnect is a relatively new company that strives to support Canadians who have poor credit scores but need a loan. While the company is not a registered loan provider itself, it acts as the middle-man that matches you with lending institutions which best suit your needs. The company is best known for helping people get the best rates on guaranteed loan approvals from $500 to $50,000 in value, regardless of their actual credit score. LoanConnect partners offer loan terms from 6 to 60 months and some rates can even be as low as 4.6% APR. The application process is quick and simple, and the company provides connections to loans for any common purpose: debt consolidation, credit improvement, credit card payments, auto/travel loans, and large sum purchases.
- NO credit score requirements
- Variety of different loans offered
- Nationwide accessibility
- Simple and efficient digital registration
Being a part of a wide group of global lending partners, LendingMate has become the world’s largest non-bank guarantor loan providing company. Over the past 10 years the company has lent over $2 billion worth of funding to aid more than 500,000 individuals in need of credit. The company’s business model relies heavily on its implementation of guarantors to allow cheap and easy borrowing. LendingMate realizes that borrowing money on a poor credit score from any major financial institution is a difficult task, and in cases where you do manage to secure a loan the rates are typically unfavourable. That’s what gives them a competitive edge – they leverage the safety of a guarantor to virtually remove the risk from loan defaults. LendingMate will extend help to anyone with a suitable guarantor regardless of their personal credit health, assuming the individual is not currently bankrupt. The application process is easy, and if the guarantor understands and agrees to the loan conditions, then LendingMate will rapidly provide the loan. As soon as you’re approved, interest is calculated daily to give you the option of paying the remaining loan balance early.
- No fees for: late payments or early repayments
- Direct lender so no brokerage fees
- Guarantor policy shields them from risk to give you better rates
- Loans are unsecured so you do not stand to lose ownership of personal assets
- Simple loan approval process
- Provincial availability: ON, QU, BC
Established in 2012, Loans Canada is another lending platform that is designed to match borrowers with loan providers. Much like LoanConnect, the company intends to provide Canadians with a variety of different loan options that best suit their individual need – just not directly. Acting like a brokerage, Loans Canada acts as a “loan finder” or a bridge between the borrower and the lender. The company offers an incredible range of loan amounts, ranging from $500 up to $300,000 and some of these loans can even be signed under a 5 year repayment period. The competitive advantage of Loans Canada over other loan providers is the size of its lender base. Since their network of lenders is so vast, you’re highly likely to be offered some type of loan even in a poor credit situation, saving you the trouble of deal-hunting.
Loans Canada Features:
- Expansive loan network
- Offers both secured/unsecured loans
- Responsive providers (48 hours to receive loan)
- No minimum income/credit score requirements
While the company has been operational since the year 2005, they only recently set their business roots in Canada in 2015. Ferratum is actually a “fintech” pioneer based in Finland, and they take great pride in their simple and effective lending service. The company’s competitive edge in Canada is their ability to offer flexible loan repayment periods. Borrowers are able decide between monthly, bi-weekly, or even weekly loan repayment periods, and either option is fee-exempt. Aside from the APR on the loan, Ferratum charges no penalties or additional charges. The online lending company offers small personalized loans from $500 to $15,000 for a maximum term of 5 years. Another great perk to Ferratum’s smaller sized loans is the speed at which your request is processed – you may be able to receive deposited funds within the same day you apply!
Ferratum Loans Features:
- Website has built-in online calculator for fast quotes
- Exceptionally fast application and approval times
- Ideal for fast cash small loans
- Strict eligibility requirements (20 years, Canadian citizen, employment status, credit score > 600)
- Provincial availability: ON, AB, BC, NB, NS, NF
WHAT YOU NEED TO KNOW ABOUT BAD CREDIT LOANS
What is a Bad Credit Loan?
A bad credit loan is any sort of debt offered to individuals with relatively poor credit scores. Typically, these are offered by financial institutions that specialize in this sector – since you’ll be hard pressed to find a bad credit loan from traditional banks. You can take out a loan on poor credit for various purposes which are usually personal: medical bills, automobile bills, and virtually any situation where you need access to fast cash. Institutions that lend to clients with bad credit can (almost) always guarantee a loan approval, but occasionally your credit health will affect the interest rate on loan repayments. As you know, the 3-digit numerical representation of your credit worthiness (also known as your credit score) is critical to traditional lending, and if it’s deemed “below the fair range” a bank will generally deny your loan request without alternatives. Personal bad credit lending companies find different work-arounds to lower their loan default risk while providing you with the funding you need.
How Do Bad Credit Loans Work?
In terms of the actual product, a bad credit loan is a one lump sum installment that is given out to borrowers along with its terms for repayment. For reputable bad credit loans, companies will offer loans ranging from a couple hundred to thousands of dollars, for terms as short as a month or as long as 5 years. As a result of bad credit loans being inherently risky, most of these products will be much smaller in dollar amount when compared to traditional loans, such as a conventional mortgage. From a lender’s perspective, risk on borrowed funds is determined by two different factors: whether the loan is secured/unsecured, and the condition of the borrower’s credit history. A secured credit loan involves “backing up” the lump sum amount with an asset such as a house/car, and a borrower’s credit history reflects their ease of repayment. Both of these factors add a real risk of loan default to lenders, and so to make up for this added risk, lenders will generally offer these loans at a higher interest rate. Truthfully, the fact that this is considered “expensive debt” isn’t very ideal for the borrower – especially since their credit score isn’t within the right range. However, whether the loan is ideal/not ideal, the importance of bad credit loans lies in its efficient funding and its basically guaranteed approval. At their core, poor credit loans are typically fast, simple, and do not require hard credit checks.
What Do I Need For a Bad Credit Loan?
PERSONAL INFORMATION: Mainly for the purpose of identification, your personal documents serve to notify your lender that you meet the legal requirements for their loans. In most cases, these serve as proof of your legal age and Canadian citizenship status.
EXISTING DEBT: Usually a lender will want to have some sort of insight into your debt background. In most cases, they will consider mortgages and other asset-backed loans first because they’re a major financial responsibility. These loans will also tell the lender about your debt repayment priority – if you ever go bankrupt while owning a mortgage, your mortgage provider will be number one on the list to be repaid from the sale of assets.
EMPLOYMENT STATUS: Due to most bad credit loans being unsecured in nature, your cashflows are a vital consideration to poor credit lending companies. The absolute best way to get approved for a bad credit loan is to show proof of stable cashflows (salaries, predictable periodic income, working hours, etc). In many scenarios, self-employed workers or independent contractors can have poor credit health as a result of irregular income – and will therefore have their loan requests denied at a traditional bank.
After your loan provider completes a full review of your personal, credit, and work information they will begin talking about possible loan terms. Terms of borrowing typically include the maximum available dollar amount, the interest rate on payments, and the time length. Obviously, the more favorable your profile is to their institution, the more flexibility and negotiating leverage you’d have on these terms. Once you’ve settled on an agreement, the lump sum funding from the loan will be deposited into your account in a matter of days (or sometimes hours).
Bad Credit Loan vs. Peer to Peer Loan (P2P)
Revolving around the same topic of having poor credit, peer to peer loans (P2P) are another alternative way to borrow funds to a conventional banking personal loan. Much like bad credit loans, these are usually requested by individuals with a lower than average credit score. The difference is, P2P loans are not directly issued by a financial institution – the lump sum of funds generally comes from an individual investor. Someone who invests in P2P loans will put their own capital at risk in the hopes of earning a solid return, and giving a percentage to their partnered institution, eliminating much of the institution’s default risk. As a result, you would typically need a higher credit score to be approved for P2P loans when compared to a guaranteed bad credit loan. Occasionally, you’ll find P2P lending networks with relaxed eligibility requirements, and from the perspective of the borrower these are no different from a bad credit loan – easy approval at a higher premium.
OUR THOUGHTS ON PERSONAL LOANS FOR BAD CREDIT IN CANADA
Truthfully, across most of Canada there’s always a way to achieve fast loans without needing to deal with predatory lenders. Considering the task’s difficulty, borrowing on poor credit shouldn’t cripple your debt situation beyond repair. Today, with some bad credit loan rates hovering around 4% APR, there’s less need to be skeptical. As a matter of fact, when used responsibly, taking out a bad credit loan and repaying it on time will actually improve your credit in the long term – it can serve as a beneficial move for a credit rating increase. We hope to save you time in your search for a personal loan by listing four reputable lending sources – it’s very important that you choose a well-received financial institution!
If you’re curious about your credit health and want to learn more about how you can improve it, check out our article on Credit Score Monitoring Software
Bad Credit Loan Frequently Asked Questions (FAQ)
What are personal bad credit loans used for?
As a general statement, there are three main reasons to take out a personal loan.
The first reason is to consolidate any outstanding debt. Essentially, you can offset high interest debt with a lump sum credit loan at a higher interest. For instance, it can make more financial sense to pay off a 15% rate credit card bill with a personal loan that only charges you 10%. The second reason to get this type of loan is in an emergency situation. Poor credit loans are provided fast, and they can help shield you from financial damage if you haven’t yet established a personal emergency fund. The third reason you’d need this type of loan is to cover any unexpected costs that you haven’t financially prepared for, such as important home maintenance (gas/pipe leak, broken ventilation systems, etc) or funeral expenses. Funerals are surprisingly a very large unexpected expense, and can cost thousands of dollars for a standard procedure.
Do I need a downpayment for a bad credit loan?
In the vast majority of cases, the answer is no. When requesting a bad credit loan, you’re likely aiming to receive a few thousand dollars in which case a down payment wouldn’t be the greatest indicator of your worthiness as a borrower. None of the lenders we have listed in this article require any funding from you up front.
What happens if I can’t repay a poor credit loan?
In some scenarios, lenders that wish to be greatly protected from default risk will have “safety net” systems in place to ensure that they recover their loaned amount. In the case of Lending Mate, they leverage “guarantors” that they can rely on for fall-back repayment. Other lending institutions may prefer the secured loan route. On the other hand, if you’ve raised zero collateral with your loan provider and find yourself at risk of defaulting, you’ll likely face strict penalties.
What is the average rate for a bad credit loan in Canada?
As of 2020, you can expect to see APR interest on bad credit loans advertised around 20% to 50% for truly low credit scores (although this mainly applies to completely unsecured loans). While significantly more difficult, locking into a secured bad credit loan will likely net you a lower APR.