Have bad credit but need a loan? You have options.

We compare different loan options available to those with bad credit.

It’s been reported that the “magic number” for good credit in Canada is a score of 650 or higher. Having poor or bad credit — one that’s below 650 — can make it much more difficult to qualify for a personal loan. However, it’s not impossible. You’ll likely have to pay higher interest rates than borrowers with good to excellent credit scores would pay, and you’ll probably need to apply with a lender that looks at more than just your credit score to qualify.

Interested in learning more about how bad credit personal loans work? Read our guide to find out how these types of loans work, where you can get one, things to avoid and how to improve your credit score. We answer some of the most frequently asked questions about bad credit personal loans.

How do bad credit personal loans work?

You first have to look for lenders that provide loans to people with poor or bad credit scores. These lenders may look at your credit history, but they’ll also take your existing financial condition into account as well as your ability to repay the loan.

Depending on the lender you choose, you can apply in person at a physical store or online, but remember that you’ll have to meet some basic eligibility criteria, as is the case with any loan.

If you apply in store, you can get your hands on the approved cash almost immediately. While some lenders may give you access to funds on the same day, others may require you to wait one to three business days, or longer. With online loans for bad credit, the money will be transferred into your bank account, usually by the next business day.

Online loans to apply for with bad credit

Here are some loan providers that you can apply to with a credit score below 650. Note that the maximum loan amount is based on the lender’s maximum amount and will vary based on your province of residence. Check the websites of any lenders you’re interested in to confirm they operate in your province.

Name Product Min. Loan Amount Max. Loan Amount APR Fees Loan Term Min. Credit Score
26.99% - 39.99%. Varies by loan type and province
Varies by province
6 months - 5 years
Fairstone offers small to medium personal loans up to $20,000.
19.99% - 23.99%. Varies by loan type and province
Varies by province
3 - 10 years
Fairstone offers secured personal loans up to $30,000.
5.9% - 45.9%
NSF fee - $20 to $48
2-5 years
Mogo offers loans up to $35,000 on flexible terms.
18.9% - 54.9%
1-5 years
An established online lender with loans up to $10,000. Now accepting applicants on El and Social Assistance.

Compare up to 4 providers

Where can I get a loan with bad credit?

While you might not be able to walk into a bank to get a bad credit loan, since they typically require you to have fair to excellent credit, you still have several options.

  • Online lenders

You might be able to qualify for an online personal loan with bad credit if other aspects of your personal finances are satisfactory. You’ll likely get your funds faster than you would with a bank or credit union, though you may have to pay a higher interest rate. Just be sure you meet your lender’s eligibility requirements before submitting an application, many allow you to prequalify without it affecting your credit score.

  • Short term lenders

Credit unions and local banks take a few days to approve and disburse loans, meaning they aren’t great options if you need cash quickly. That’s where short term lenders can help, both online and in-person. In emergency situations, you can apply for a payday loan, installment loan or auto title loan and get funds in as little as a day or two.

With these types of loans, you’ll typically get higher interest rates than other lenders. They also come with the risk of getting into further debt if you’re unable to make your payments on time.

Know what you’re getting into before taking out a short term loan

  • Credit unions

These nonprofit financial institutions generally offer financing to borrowers of all credit types with much lower interest rates than you’d get at other institutions. Many even provide credit builder loans, or small short term loans designed to improve your credit score before you apply for larger amounts of financing.

Credit unions are typically a better option for those who aren’t in a rush to get cash: You’ll have to become a member to qualify and it can take some time to get your money.

Find a credit union loan you can qualify for

What types of bad credit personal loans are there?

In your search for bad credit personal loans, you have the following options:

  • Payday loans. Payday loans are short term loans that you typically have to repay by your next payday. You don’t have to provide any collateral to secure these loans, but you can expect to pay a higher than usual annual percentage interest rate (APR).
  • Installment loans. An installment loan requires you to make equal periodical repayments over a predetermined loan term. These loans don’t require any collateral and normally charge lower APRs than payday loans – although the rates are still higher than most personal loans.
  • Auto title loans. If you have a car, motorcycle, boat or RV, you can use its title as security and get an auto title loan, however you are still able to use your vehicle. Since you’re providing security, you can expect to pay a lower APR when compared to payday or installment loans. You’ll have to repay this type of loan in installments over a predetermined time period. If you don’t make the repayments, the lender can take possession of your vehicle.
  • Cash advances. Cash loans for bad credit are essentially the same as payday loans. If you have a credit card, you may be able to use its cash advance feature to withdraw money from an ATM, but keep in mind the interest rates for cash advances are very high and are charged from the moment you withdraw the funds. If you have a steady job, you might consider getting a cash advance from your employer.
  • Credit builder loans. If you don’t need money immediately, you can consider improving your credit score by taking out a credit builder loan from your local bank or credit union. You can usually borrow a small amount with relatively low interest rates – sometimes as low as $100 – and pay it off over six months or so. This will give you the cash you need and help you build up your credit score.Back to top

5 benefits of bad credit personal loans

Here are some of the benefits of taking out a bad credit personal loan:

  • It’s unsecured. These loans are typically unsecured, so you don’t have to provide any kind of collateral.
  • It’s fast. You can apply for most loans in just minutes, and you can expect to find out if you have been approved or not quickly after. If you need access to money quickly, you can look for lenders that provide access to approved funds on the same day or by the following business day.
  • Your rates don’t change. Bad credit personal loans usually have fixed interest rates, so you don’t have to worry about your repayments increasing over time. This can help you set a budget and stick to it.
  • You can use it for most purposes. If you have debt on a high interest credit card, you can consider taking a personal loan to consolidate your existing debt. This can help you save on interest charges and simplify your repayments.
  • You can repay without a penalty. This is not true for all loans, but some lenders will let you repay your loan ahead of time and won’t charge you any additional fees. Repaying your loan faster can reduce how much you end up paying in interest. Read the terms and conditions of your loan before you make any early repayments.

How can I tell if I have bad credit?

Most Canadians don’t know exactly what their credit score is. You can get a free copy of your credit report from any of the two main credit bureaux in Canada: TransUnion or Equifax. You can also get an estimate of your credit score from companies that do a soft credit pull that doesn’t affect your rating.

Those with bad credit have typically either struggled paying off debt in the past or simply don’t have a long enough credit history to get a good credit score.

What to avoid when borrowing with bad credit

If you already have poor credit, make sure you have a suitable repayment plan in place before you apply for any loans. Failure to repay the loan in a timely manner can have a further negative effect on your credit rating.

Avoid applying for multiple loans at or around the same time, as prospective lenders don’t view this favourably. Keep in mind that each time you apply for a loan, your credit score takes a slight negative hit.

The APR you pay can have a significant effect on how much your loan ends up costing you, so make sure you compare the rates of different lenders carefully. Fees can also vary widely depending on the lender. Be sure you understand what fees your lender could charge you before you sign and accept a loan offer.

How to improve your credit score

Improving your credit score can be a slow process, however it’s well worth it so that you can eventually have an easier time getting more competitive financing. A better credit score will also open up more options for you, and provide you with more favourable interest rates and loan terms. Here are a few things you can do now to slowly improve your credit score:

  • Order a copy of your credit report. To get the most accurate picture of your current financial health, request a free credit report from one of the two major credit bureaux – Equifax or TransUnion. Take a look at your personal information, employment data, open accounts and balances and any other financial details listed and make sure that all of the information is accurate. If you see any discrepancies, dispute them with the credit bureau and the provider that reported them.
  • Pay down your credit card accounts. One of the five variables that determines your credit score is your credit utilization ratio, which is calculated by dividing your balance on existing credit cards by your available credit limits. Most lenders want to see a utilization ratio of 30% or less. This means that if you have a credit card with a $1,000 limit, you only want to keep a balance of $300 or less, which is 30% of your limit.
  • Don’t try to open up new accounts or take out new loans. Every time you apply for a credit card or personal loan, the lender does a hard credit check, which knocks your credit score down around 5 points. These tiny knocks can add up and really start to affect your credit score.
  • Don’t close accounts just because you’re not using them. One of the variables that determines your credit score is your credit history. Lenders want to see a long history of credit in your report, so closing a bank account or credit card that you might not be using anymore could cause more harm than good.

Frequently asked questions

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