When you have a poor credit history, you’re usually not eligible for a loan from a bank or a traditional credit lender. However, there are other loan options available to you, even if you have a bad credit history. To get a loan with bad credit, you’ll need to show that you can repay the loan by providing evidence of a steady income.
Tips on being approved for a loan with bad credit
There’s no one surefire way to ensure you’re approved for a loan application. When you’re considering applying for a loan and your credit history isn’t perfect, keep the following tips in mind:
Check the eligibility criteria before applying. Lenders have set eligibility criteria which can often vary between different lenders. Check to see if you meet the criteria, and if you’re unsure, you can call the lender to discuss your specific situation.
Order a copy of your credit file. While you may think you have a good idea of your credit history, your credit file is the only true record of your financial history. This is what lenders will use to judge your creditworthiness. You can order a free copy of your credit file from one of the two credit bureaux in Canada – Equifax or TransUnion.
Compare your loan options before you apply. Every application you submit makes a small negative mark on your credit file, so make sure you compare your options before you apply for loans in order to minimize the negative impact on your credit score.
Options for a $5,000 loan with a good credit rating
If you have good credit score (usually a minimum score of 650 or higher) you could be eligible for a loan from a bank, credit union or a standalone lender at a more competitive interest rate than you’d get from providers who lend to people with bad credit. You may be able to borrow up to a limit of $10,000 without providing collateral such as your car or house.
Compare $5,000 personal loans
Sudden roof repair
Charlie and Blake inherited Blake’s mom’s house after her death and have recently moved in. After paying a large amount of tax and funeral costs, their savings have been depleted. Unfortunately, the roof needs repairs soon otherwise it will continue to leak and cause extensive water damage.
After going through a bank and being rejected because of their bad credit histories, Charlie and Blake decide to head online and start comparing personal loans from different lenders. They’ll need about $5,000 for repairs, and they quickly find a provider who will give them that amount with a stiff financing fee and high interest. It’s their only option, so they quickly rebudget to make room for the high monthly payments over the next 36 months. Although their original loan amount was $5,000, Charlie and Blake start paying over $600 a month to their lender. At the end of three years, this amounts to over $25,000 in payments.
It’s a lot of money, but they have a functioning roof over their heads.
Benefits and drawbacks to consider when comparing $5,000 loans
Online applications are convenient. The convenience of online application forms and quick approval systems can save you time. You’ll also have a chance to compare a range of different loan providers, giving you more choices when it comes to loan amounts and terms.
There are minimal or no credit checks for bad credit personal loans. Getting a bad credit unsecured loan gives you access to lenders who look at your current financial situation when considering you for a loan. If you have major credit problems, you can consider a no credit check loan.
Simple repayment terms. You’ll generally have your repayments scheduled for the same time as your paycheque, whether that’s weekly, bi-weekly or monthly, and some lenders will give you the option of different ways that you can make repayments. Direct debit repayments are offered by most lenders so you don’t have to worry about making the repayments yourself, you just need the money available in your account and it’s withdrawn automatically.
The loans can be costly. Due to the high risk lenders take when giving out a loan to someone with a proven track record of bad credit, the lender will usually charge higher fees. Keep in mind that there some provinces have regulations surrounding the amount of fees that can be charged, although territories usually don’t.
Disreputable lenders operate in the bad credit loans space. There are many disreputable lenders operating online who prey on people with bad credit, so make sure you evaluate the lender before you apply.
Direct debit can lead to overdrawing your account. While direct debit loans can be positive, it can prove costly if your account becomes overdrawn by your lender automatically withdrawing owed funds.
Things to avoid with bad credit unsecured loans
There are several risks associated with bad credit loans that don’t require collateral. Here are some things you should avoid:
Not being cautious. Taking out a bad credit personal loan can come with high fees and inflexible terms.
Not considering the affordability. Make sure you check twice before applying for a bad credit unsecured personal loan up to $5,000. The repayment period is much shorter than standard loans, meaning your repayments can be quite high each week, month or every two weeks, depending on your repayment plan. Lenders usually offer calculators to show an indication of your repayments.
Not considering the fees as well as the interest rate. Lenders may charge you an interest rate as well as fees and other charges. Check all fees before you apply and consider the total cost of the loan.
4 quick ways to borrow money compared
Type of Lender
Typical Interest Rate
Estimated Turnaround Time
Preapproval decision in 1-3 business days Funding within 7 business days
Bad Credit Online Loan
Preapproval decision same day Funding within 1-3 business days
Preapproval decision right away Funding as soon as the next business day or same day if applying in person at a store
Peer-to-Peer Personal Loan
Preapproval decision same day Funding within 7 business days
Frequently asked questions
This will differ between lenders, but you will usually receive a notification as to whether you have been approved or not for the loan, via email or telephone, along with further instructions for the next steps.
When you apply for an online loan up to $5,000, your details are securely transmitted over an encrypted connection. The majority of sites you might apply to use 128-bit or 256-bit SSL encryption to ensure your details are safe and secure.
When institutions lends you money, they want to be certain that you can repay back the debt within the allocated timeframe. If you’re unemployed, your income may be limited unless you’re receiving benefits. If the majority of your income comes from welfare payments or government benefits, you may still be eligible for a personal loan – but be sure to check with the lender.
This depends on the individual lender. When reviewing your loan contract, be sure to voice this question as some payday loan lenders charge extra fees for early repayment.
Funds are usually deposited into your bank account on the next business day, but it may take longer for larger amounts. It ultimately depends on the lender and your bank.
While not all lenders report to the credit bureaux that handle your credit score, some might choose to report late or missing payments. This is at the discretion of the lender.
The best solution is to contact your loan provider and inform them. Usually, the lender will be willing to extend the payment deadline and find ways to help you through difficult financial times. Keep an open line of communication between yourself and the lender as much as possible.
Aliyyah Camp is a publisher helping folks compare personal, student, car and business loans. Prior to joining Finder, she ran her own personal finance blog and wrote for numerous finance sites. Aliyyah earned a BA in communication from the University of Pennsylvania. She likes to go to the movies and go for runs outdoors.
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