If you have bad credit and need a loan to cover your bills or unexpected expenses, you have options. There are many lenders in Canada that specialize in loans for bad credit, and you can get one as soon as the same day or the next day. However, not all bad credit loans and lenders are the same.
This guide covers the main types of bad credit loans in Canada available to you and what you need to know to pick the best one for your needs.
2 main types of bad credit loans in Canada
As you search for bad credit loans online, you’ll encounter different types. Here’s a breakdown of the two most common types in Canada:
Type of bad credit loan
How it works
Interest rate
Loan amount
Loan term
Unsecured personal loan
Borrow without collateral and repay in installments.
18% to 47% APR
$$500 to $10,000
6 to 60 months
Payday loan
Borrow without collateral and repay by your next payday.
$14 to $17 for every $100 borrowed
$100 to $1,500
By your next payday
Unsecured personal loans for bad credit
Best for: Borrowers looking for a bad credit personal loan without collateral.
You can find personal loans among banks, credit unions and online lenders. However, if you have bad credit, your strongest chance of approval is with online lenders because they’re more lenient with eligibility requirements. With unsecured personal loans, online lenders shift the focus from your credit score to your ability to make loan repayments. Lenders will want to see that you have regular income.
Compare personal loans for bad credit in Canada
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Basic eligibility requirements of personal loans for bad credit
Be the age of majority in your province or territory (18 or 19)
Be a Canadian citizen or resident
Meet the minimum income
Meet the minimum credit score
Before you sign up for a bad credit personal loan
Know how much you’ll pay in interest and fees. Bad credit loans have high interest rates, so find out how much the loan will cost you overall.
Examine the payment schedule. Know how much of your payments will go towards paying the interest vs reducing the principal.
Check that the loan will improve your credit score. Confirm with your lender that it will report your on-time payments to the credit bureaus.
Research the reputation of the lender. Not all lenders are the same, so make sure the lender you go with is legitimate.
Signs of a legitimate lender
The lender is upfront and clear about the interest rates, fees and overall cost of the bad credit loan.
The lender does not push you into signing a contract or borrowing more than you need.
The lender does not pressure you to get loan insurance. If you do decide to get loan insurance, you don’t make any payments upfront.
5 steps to apply for bad credit personal loans
If you’re thinking a bad credit personal loan is right for you, follow these steps:
Before you get started with an application, check your credit report so you have a good read on how you’ll appear to lenders. To get your credit report, order a free copy from one of the credit bureaus Equifax or TransUnion. Getting your credit report can take a few days to a few weeks, but it is the true representation of your credit. If you see any discrepancies on your report, you can file a dispute with the credit bureau. This process can also take a few weeks, but it can improve your credit score.
If you are pressed for time, there are free tools online that can give you an idea of your credit score via a soft credit check.
Once you have a good read of your credit, find lenders that would be open to your financial situation. Lenders vary in their eligibility criteria. For example, some have minimum credit scores at 300, while others at 550. Some have strict minimum monthly or annual income, while others evaluate on a case-by-case basis.
Also compare the features of the bad credit personal loans, such as the annual percentage rate (APR), loan amounts and loan terms. Ask about extra fees it may charge you, such as an origination fee (fee to process your loan), prepayment penalties, late payment fees and NSF fees.
When a lender gives you personal loan pre-approval, it means it has quickly scanned your finances and wants to proceed with your application. It will give you an idea of the rate you qualify for, but it’s not guaranteed yet, because the lender will still need to do a more in-depth review.
Mogo and Fairstone are examples of lenders that can give you a free quote within minutes without impacting your credit score.
If you’re happy with the loan offer you’re pre-approved for, proceed with the rest of the application. You may be asked to submit documents to verify the information on your application, such as pay stubs, bank statements and ID.
Once your lender verifies your identity and your income, you’ll receive your official loan offer. Read over your loan agreement, taking factors such as your loan amount, APR, fees and payment schedule into account. Once you sign your loan, you’ll receive the money in your bank account within 1 business day.
Best for: Borrowers who need a loan in a few hours and have considered all other financing alternatives.
With payday loans for bad credit, you can borrow up to $1,500, and the amount is usually repaid by your next payday. Be careful with payday loans: they’re fast and easy to get, but payday loans come with notoriously high interest rates and super quick repayment terms.
Compare bad credit payday loans
⚠️ Warning: Be cautious with payday loans
High-cost payday loans are unsustainable for borrowing over a continued period of time and are expensive as a means of longer-term borrowing. View payday costs and regulations by province here. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). You may also want to consider payday loan alternatives.
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Maximum borrowing costs of payday loans per province
Always refer to your contract for exact repayment amounts and costs.
Province
Max. cost of borrowing a $100 payday loan
Cooling off period to cancel loan
Max. penalty for returned cheque or pre-authorized debit
Alberta
$15
2 business days
$25
British Columbia
$15
2 business days
$20
Manitoba
$17
48 hours excluding Sundays and holidays
$20
New Brunswick
$15
48 hours excluding Sundays and holidays
$20
Newfoundland and Labrador
$14
2 business days
$20
Nova Scotia
$15
Next business day (2 days for online loans)
$40 (default penalty)
Ontario
$15
2 business days
$25
Prince Edward Island
$15
2 business days
N/A
Quebec
Limit of 35% AIR
N/A
N/A
Saskatchewan
$17
Next business day
$25
Basic eligibility requirements of bad credit payday loans
Be the age of majority in your province or territory (18 or 19)
Be a Canadian citizen or resident
Have a recurring income
Before you sign up for a payday loan
Know the real cost of payday loans. Payday loans have APRs in the triple digits, making them more expensive than credit cards, credit card cash advances and personal loans.
Check your budget for your next payday. Ensure you’ll have enough income left to pay for other debts and expenses once you repay your loan. Otherwise, you might find you need another loan.
Look for a licence. Confirm the lender is licensed in your province and follows payday loan regulations. Payday loans are regulated by each province.
Signs of a legitimate lender
The lender does not charge more than what’s legally allowed in your province.
The lenders doesn’t ask for any money upfront.
The lender has a solid online presence, with its address, email and phone number easily found.
The lender has a licence for each province where it operates.
3 steps to apply for bad credit payday loans online
The steps to apply for bad credit payday loans are straightforward. It’s possible to get a payday loan in 1 hour or less.
Input your details such as your name, address, phone number, email, employment, income, and housing situation.
Payday lenders use automated systems, and you’ll usually get a decision within a few minutes of submitting your application.
Review your loan agreement, taking into account your loan amount, interest rate and repayment schedule. Sign if you accept the terms. Once you submit your contract, you’ll get your money within a few minutes via e-transfer. If you opt for direct deposit, you’ll get your money within 1 business day.
Across the board, borrowers will find it far easier to get approved for bad credit loans from online lenders and brokers compared to traditional lenders. Here’s a closer look at your options.
Online lenders
Online lenders are your most realistic option because they have more lenient requirements than banks and credit unions. Many will work with borrowers who have less-than-perfect credit. The turnaround time is often 1 to 2 business days for an unsecured personal loan and as little as 1 hour for a payday loan. But these benefits come with a trade-off: your interest rates will be higher than what you’d get with a bank or credit union.
Online brokers
Instead of applying to a direct online lender, you can apply to an online broker. By filling out 1 application, online loan brokers like Loans Canada and LoanConnect will match you with lenders that want to finance you based on your financial situation.
What can I use bad credit loans in Canada for?
Unless you specifically apply for a bad credit loan to consolidate debt, there are no restrictions on how you can use bad credit loans. Once you qualify and verify your identity and income, your lender will deposit your money into your account, and you can use the cash as needed.
Bad credit loans in Canada are most often used for:
Financial emergencies
Paying for monthly bills
Funding a major purchase
Rebuilding your credit
Keep an eye on the interest rates of bad credit loans
The interest rate a lender offers is one of the most important factors to consider. Unfortunately, bad credit loans in Canada have much higher interest rates compared to good credit loans because lenders are taking on more risk to lend you money.
What is APR and why is it important?
As you search for bad credit loans in Canada, you might encounter the terms “interest rate” and/or “APR” (annual percentage rate). This could cause confusion because the two are different.
Interest rate: This is what the lender charges you for borrowing money from them. It is a percentage of the amount you borrow, and it is usually an annual interest rate.
APR: This is the annual cost of a loan that includes the annual interest rate plus other fees you need to pay to get the loan. Looking at the APR is helpful because it gives you a truer view of the cost of the loan.
6 tips to find the best bad credit loan for you
With many bad credit loans on the market, here are tips to find the best and help you get approved:
Steer clear of predatory lenders. Avoid lenders that promise to approve you no matter what. Legitimate lenders will first review your finances before approving.
Don’t rush. Don’t sign anything without understanding the terms of your loan, such as how much it’ll cost you overall, how long it’ll take you to repay it and any extra fees you might encounter.
Watch out for long loan terms. The longer the loan term, the more interest you’ll pay on a personal loan. Aim to get the shortest loan term possible with payments you can still manage.
Get a secured loan. You’ll increase your chances of approval if you offer collateral. Just be careful: defaulting on a secured loan means losing whatever asset you put on the line.
Find a cosigner. Having a friend or family member cosign a loan will increase your chances of approval. But they’ll be on the hook for repayments should you find yourself unable to pay, so make sure they understand what they’re committing to.
Rebuild your credit first. If you can wait at least 6 months, rebuild your credit first. While it will take time and careful budgeting, improving your score means lower rates in the future and a better chance of approval.
The bad credit loans below are less common than unsecured personal loans and payday loans, but you may encounter them in your search as well.
Type of bad credit loan
How it works
Interest rate
Loan amount
Loan term
Home equity loan
Borrow using your house as collateral and repay in installments.
10% to 29% APR
$5,000 to $50,000
60 to 120 months
Car title loan
Borrow using your car as collateral and repay in installments. You can continue to use your car, but it must be paid off.
9% to 49% APR
$$1,000 to $50,000
3 to 60 months
Credit builder loan
Make repayments that your lender will report to the credit bureaus to increase your credit score. You don’t receive the loan amount until after you make your repayments.
9.5% to 20% APR
$1,250 to $10,000
6 to 24 months
Home equity loans for bad credit
Best for: Homeowners who want to lower their interest rate and can manage the repayments.
With home equity loans, how much you own in your home will be used as collateral. You will need to provide details of your mortgage, your personal financial position and the reason you’re taking out the loan. You will be given a loan based on how much home equity you hold and how much the lender thinks you can afford to repay. If you were to default on the loan, the lender could recoup its losses by taking ownership of your home equity.
Home equity loans take longer to get than other loans because the lender will need to evaluate how much your house is worth.
Compare home equity loans for bad credit
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Basic eligibility requirements of home equity loans for bad credit
Be the age of majority in your province or territory (18 or 19)
Be a Canadian citizen or resident
Meet the minimum income
Meet the minimum credit score
Submit your house for appraisal
Car title loans for bad credit
Best for: Borrowers who want to increase their chances of approval by using their car as collateral.
A car title is your proof of ownership of your vehicle, and when you apply for a car title loan, you’re using your vehicle as collateral. You can continue to use your car, but if you default on your loan, the lender could repossess it. Lenders usually need your car to be paid off in order to approve you for a car title loan.
Get a car title loan with bad credit
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Basic eligibility requirements of car title loans
Be the age of majority in your province or territory (18 or 19)
Be a Canadian citizen or resident
Meet the minimum income
Drive your car to the lender’s office or submit photos for inspection
Credit builder loans for bad credit
Best for: Borrowers who want to improve their credit score and can wait at least 6 months to get their money.
With credit builder loans (sometimes called “cash-secured loans”), you don’t receive the loan amount until after you pay off the loan. If you stop making payments, the lender can keep the loan money or a portion of it. You’ll need to make timely payments on your loan, which your lender will report to the credit bureaus so that your credit score can improve.
Basic eligibility requirements of credit builder loans
Be the age of majority in your province or territory (18 or 19)
Be a Canadian citizen or resident
Meet the minimum income
Summary of information you’ll need to provide lenders
Applying for bad credit loans in Canada is pretty simple. Depending on the lender you’ve decided to work with, you can complete an application online, over the phone or in person at a physical branch.
Here’s a closer look at the documents and information you may need to provide on your application:
Type of bad credit loan
Required documents and information
Unsecured personal loan
Name and date of birth
Contact information
Employment details, including your job title, company and income
Government-issued ID (passport, driver’s licence, citizenship card)
Pay stubs or bank statements
Loan purpose and loan amount
Bank account details
Social Insurance Number (SIN)
Payday loan
Name and date of birth
Contact information
Government-issued ID (passport, driver’s licence, citizenship card)
Proof of income (pay stubs, bank statements, benefits letter, etc.)
Bank account details
Home equity loan
Name and date of birth
Contact information
Employment details, including your job title, company and income
Government-issued ID (passport, driver’s licence, citizenship card)
Proof of income (pay stubs, tax returns or bank statements)
Loan purpose and loan amount
Bank account details
Social Insurance Number (SIN)
Copy of the property’s title deed
Copies of recent mortgage statements
Copies of last property tax bill
Car title loan
Name and date of birth
Contact information
Employment details, including your job title, company and income
Government-issued ID (passport, driver’s licence, citizenship card)
Proof of income (pay stubs, tax returns or bank statements)
Car title (proof of vehicle ownership)
Your vehicle’s VIN (vehicle identification number), make and model info, and permit number
Bank account details
Credit builder loan
Name and date of birth
Contact information
Employment details, including your job title, company and income
Government-issued ID (passport, driver’s licence, citizenship card)
Proof of income (pay stubs, tax returns or bank statements)
Bank account details
Bottom line
Bad credit isn’t the end of the line when it comes to taking out a loan. Before applying for a bad credit loan, compare your options, check that you meet the eligibility requirements and understand how much the loan will cost you.
Frequently asked questions
There are several types of loans you can get with bad credit, including unsecured personal loans, secured personal loans, payday loans and car title loans. Choose a type of bad credit loan based on key features like loan amount, loan term and interest rate, and from there research lenders. Each lender will have its own loan features and eligibility requirements. Before applying, check that the loan matches your needs and you meet the lender's requirements.
If you have an established relationship with your bank or credit union, check with them first. If they're unable to offer you a loan, there are online lenders that provide different types of loans to borrowers with fair or bad credit. Loan features and eligibility requirements vary among online lenders, so be sure to compare your options.
This depends on the lender you choose as well as your creditworthiness, existing financial situation and ability to repay. However, some lenders may offer up to $15,000 personal loans to borrowers with bad credit.
No, a legitimate lender should not ask you to pay any funds upfront. If a lender charges an origination or processing fee for a loan, they will typically deduct it from the loan amount. If a lender is asking for a prepaid card loaded with funds or for you to pay loan insurance, you should look elsewhere for a loan – it's likely a scam. You should also be aware that loan insurance is never required.
Carmen Chai is a freelance writer at Finder, specializing in financial products. She is an award-winning Canadian journalist who has lived and reported from major cities such as Vancouver, Toronto, London and Paris. She has reported on personal finance, mortgages, and banking products for nearly a decade.
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