Having a bad credit score can seriously affect your financial options. If you have a fair to poor credit score, which is anything typically under 650, trying to find a loan that you will be approved for can be a difficult task. Minimum credit score requirements can put traditional loans from banks out of your reach, but there are other options available to you. Short term loans for people with bad credit might be what you are looking for.
⚠️ Warning: Be cautious with payday loans
Payday loans are expensive. If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call Credit Counselling Canada from 8:00am to 5:00pm Monday to Friday at +1 866-398-5999.
Consider these alternatives before applying for a payday loan:
Contact your creditors. Speak with creditors or your electricity, gas, phone or water providers about extending payment due dates or working out a new payment plan.
Consider a personal loan. A personal loan usually comes with much lower interest rates than a payday loan.
Pay with credit card. While not a long term solution, paying with credit card can help cover emergency expenses. You’ll need to pay off the balance before it accrues interest.
Yes. Short term lenders are more concerned with your ability to repay your loan than with your credit history. Applying for a short term loan is a simple process that requires you to either go online to a lender website or visit a branch location near you. You will fill out a simple application form, and once you’re approved, you will have your funds in as little as one business day.
While applying is simple, you should keep the following factors in mind to save yourself time and money:
Compare your options. There are quite a few options available so it’s important to compare them and find the one that best fits your needs. You’ll want to look at the loan amount, repayment terms and the total cost in order to find a loan that fits what you are looking for.
Review the eligibility criteria. While these lenders do accept applicants with bad credit, they still have requirements that need to be met. Check the minimum age, income and residency requirements to avoid being rejected.
Only apply for the amount you can afford. Although lenders can’t offer you more than you can pay for, the terms may still be difficult for you to meet if the repayment period is short. You should only take out a loan for an amount which you can manage to pay back. Find a loan that works with your budget or else you may get caught in a vicious cycle of debt.
Budget to cover your payments. When you’re approved for a loan, your repayments will generally start on your next payday. Make sure that you have enough money set aside from your upcoming pay cheque to cover your loan.
Compare bad credit short term loan providers
Check the websites of any lenders you’re interested in to confirm they operate in your province or territory of residence.
Are payday loans available in my province or territory?
Payday loans are available in all provinces and territories across Canada. You should be aware that payday loans are regulated by individual provinces, which means costs and fees can vary. Ensure that any lender you choose abides by the laws of the place you live.
At the time of writing in January 2019, the Yukon, Nunavut and the Northwest Territories do not have legislation regulating payday loans at the territorial level. Payday loans are regulated in these territories at the federal level only.
Here are the pros and cons of taking out a payday loan when you have bad credit:
Easy online application. You can compare lenders online and submit your application within minutes. There’s no need to visit a physical branch in person or fax copies of your pay cheque in.
Quick turnaround time. When you apply online, you can have your loan deposited into your bank account in as little as one business day.
Disreputable lenders. Not all lenders follow provincial or territorial laws and regulations. Check to make sure yours is licensed and isn’t a scam. Always choose a reputable company that has positive feedback from real customers.
Short repayment terms. Payday loans are known for being costly because of their quick repayment schedule. Make sure you can comfortably cover your payments with your next pay cheque before you apply.
Amanda's emergency car repair
Amanda’s car broke down on her way to work. She took the morning off to visit the mechanic, who estimated her repair costs at $250. As a shift worker, she had already missed out on that morning’s pay and her pay cheque wasn’t due to come until the following week.
She needed her car repaired to get to work, but with her low credit score, she wasn’t eligible for a personal loan.
Instead, Amanda looked at how much a bad credit payday loan would cost her. There was room in her budget for the high fees and, since she was going to be paid soon, Amanda knew she could afford it. By the next day, she had enough to pay for the repairs and was able to take on an extra shift at work to make up the difference.
How to apply
Once you find a lender, make sure you meet the eligibility requirements for the loan. These may vary between provinces and providers, however they tend to include:
Be at least 18 years old, or the age of majority in your province or territory
Be a Canadian citizen or permanent resident
Have proof of a steady source of income
You will typically need to have the following information on hand when applying for a loan:
A valid form of ID
Your contact details
Proof of income
Your bank account details
How do I improve my chances of being approved?
Although lenders that offer bad credit payday loans don’t focus on your credit score, you’ll still want to be sure you’re eligible. Follow these four steps to reduce your chances of rejection and to be sure you’re getting an affordable deal.
Compare your options. It’s important to compare payday loan lenders before you settle. You’ll want to look at the loan amount, repayment terms and the total cost in order to find a loan that meets your needs.
Review the eligibility criteria. While many payday loan lenders do accept applicants with bad credit, they’ll still have minimum requirements that need to be met. Many require a certain monthly income or proof of employment.
Only borrow what you can afford. It’s very possible that the loan terms may be difficult to meet if the repayment period is too short. You should determine what you can manage to repay and find a loan that works with your budget.
Budget to cover your payments. When you’re approved for a loan, your repayments will generally start on your next payday. Make sure you’ve budgeted to cover the added expense. For example, at a 442% interest rate you’d be charged $17 in fees for every $100 advanced to you.
What other options do I have for a loan?
Depending on what you need the loan for and how much money you want to borrow, there are other loan options available to those with fair to poor credit:
Auto title loan. If you have a car, you could get an auto title loan. This type of loan is secured against the title, which in this case would be your car, so you can get a lower rate while still being able to drive your vehicle as you repay the loan.
Installment loan. These loans are similar to short term loans, but they are repaid in installments over a longer period of time. These loans could be an option for you if you need a longer time period to pay back your loan, since payday loans don’t offer long payback periods.
Guarantor loan. This option requires that someone with a good credit score cosign on your personal loan. Some lenders will essentially ignore your credit history if your guarantor has an excellent credit score and a high enough income.
If your credit is below 650, which is considered fair to poor, you can consider a bad credit payday loan. Before you settle for a loan, always take time to compare your options and view the eligibility requirements before you submit your application.
Some lenders will still check your credit file when you apply for a bad credit payday loan. Not all lenders will check – other lenders will just need to see proof of your income and evidence of your current financial situation.
Generally, you’ll find out if you’ve been approved for a loan within minutes after submitting your application. This is for both online and in-store applications.
If you apply for a loan in person at a branch location, you can usually receive your approved funds within the hour. If you submit your application online, you can expect your funds to be transferred into your bank account as soon as the next business day. Depending on your application, your bank and the lender, it may take longer than one business day to receive the funds.
Both online and in-store lenders can approve loans on weekends. However, you can only receive approved cash from a lender in person at a branch location since banks don’t transfer funds on weekends. If you’re receiving the money directly into your bank account, you will have to wait until the next business day to receive your loan.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over six years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at the IT Journalism Awards. Elizabeth's passion is writing about innovations in financial services (which has surprised her more than anyone else).
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