Personal loans for bad credit are typically meant for borrowers who have a credit score of 599 or less. While you may find yourself paying higher interest than other borrowers, if you have the ability to repay, there are lenders that can work with you.
Warning about borrowing It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
For information about other options for managing bills and debts, call 1-866-398-5999 from anywhere in Canada to talk to a credit counsellor from Credit Counselling Canada.
Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
Speak with creditors about extending the due date of your payment.
Consider a small personal loan from a bank or credit union. You may qualify for a loan with lower interest rates than a payday loan.
Pay with your credit card with credit available to cover your emergency or payment. This is not a long term solution, rather an alternative to a short term loan with higher rates.
The Financial Consumer Agency of Canada website shows you how small amount loans work and suggests other options that may help you.
Personal loans for those 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.
How to apply for a personal loan with bad credit
Depending on the lender, you may be able to complete an application online, over the phone or in-person at a physical branch. The time it takes for a lender to finalize your loan and get you funds will vary significantly. Some may be able to finish everything the same day you apply, while others may take a week or two. Check with the lender to get an idea of how long the entire process takes before applying.
What information do I need to apply?
While it varies by lender, you’ll typically be asked to provide the following:
Social Insurance Number (SIN)
Date of birth
Pay stubs, tax returns or bank statements
Where can I find a personal loan if I have bad credit?
While you might not be able to borrow from a large bank when you have bad credit, you still have several options to choose from.
Some credit unions offer financing to borrowers with all credit types, and they usually offer lower rates than you’d find at other institutions. If you’ve been a long time customer with your credit union, you’d likely have a much better chance of being approved for a personal loan. If you’re not a member of a credit union, you’ll have to become a member, which means it could take a few weeks to process your loan.
Both national and local banks may be willing to work with bad credit borrowers, however not all will. But if you’ve been a long-time customer of the bank and have an established relationship, you might have some luck. However, it may take some time for a local bank to process your application and finalize your loan.
Online lenders are the best place to look if you need money fast. Many will still work with borrowers who have less-than-perfect credit, and the turnaround time is often just one or two business days. But with this speed comes a trade-off: your interest rates and fees may be slightly higher than what you’d get with a bank or credit union.
Short-term loans include payday loans, installment loans, auto title loans and cash advances. These are meant to be repaid quickly and tend to have extremely high fees, sometimes as much as $60 for every $100 borrowed. Because of this, you should only consider a short-term loan as an absolute last resort. These types of loans are not recommend.
What interest rate should I expect?
Interest rates on a bad-credit personal loan will vary by lender, though you could see rates as high as 55% APR, or over 400% APR if you opt for a payday loan. APRs are higher when you have poor credit since you pose more of a risk to the lender.
While a low credit score won’t necessarily prevent you from finding a loan, your score will impact how much you can borrow and the interest rate you receive. Lenders view lower credit scores as a sign that a borrower is more likely to miss a payment or default on their loan.
Lenders that extend loans to borrowers with bad credit tend to look at your income, current debts and ability to repay instead of your credit score.
5 tips to get a loan with a low credit score
These tips won’t guarantee you’ll be approved for a loan, but they can help increase your chances when you have bad credit.
Rebuild your credit. If you aren’t pressed for time, take steps to rebuild your credit before you apply — or consider a credit-builder loan. While it will take time and careful budgeting, improving your score means lower rates in the future and a better chance of being approved for larger loans, like a car loan or a mortgage.
Compare multiple bad-credit lenders. If you can’t wait to rebuild your credit, then take the time to prequalify with a few different lenders to find the best offer available to you. You can even let an online loan connection service do the work for you.
Find a cosigner. Having a friend or family member willing to vouch for you and cosign a loan can significantly increase your chances of approval. But they’ll be on the hook for repayments should you find yourself unable to pay.
Opt for a secured loan. Lenders may be more willing to offer you a personal loan — with lower rates — if you back it with collateral. Just be careful: defaulting on a secured loan means losing whatever asset you put on the line.
Watch out for predatory lenders. Borrowers with bad credit tend to be targeted more with personal loan scams, so do your research before applying. Check consumer review sites like the Better Business Bureau and Trustpilot to verify the lender is legit. And read over your loan agreement carefully to ensure you understand all of the costs that come with borrowing.
How can I tell if I have bad credit?
The easiest way to know your credit score is to check your credit report. You can access your credit report from either of the two main credit bureaus (TransUnion and Equifax) or from reputable online sites like Credit Verify or Credit Karma. You can also read our guide to credit scores to learn more about the ways you can tell if your credit is below average.
What to avoid when borrowing with bad credit
Applying for a bad credit personal loan? Here are a few things to avoid:
Applying for multiple loans at once. Multiple hard pulls of your credit could impact your score negatively. Instead, try prequalifying with a few lenders to get an idea of what rates you can qualify for.
Just skimming the rates and fees. Many loans for people with bad credit can be costly, so carefully read over the loan contract before you sign. This can help you determine if a lender is right for you — and if you can afford the loan.
Borrowing more than you can afford. Make sure you can handle repayments on however much you’re planning on borrowing. You don’t want to borrow more than you actually need and end up in a cycle of debt.
Bad credit isn’t the end of the line when it comes to taking out a personal loan. Credit unions, local banks and online lenders all offer options, though how much you’re able to borrow might be limited and you’ll likely face higher interest rates and fees, since you pose more of a risk to the lender.
It’s possible, but your options will be primarily limited to short-term loans and personal loans with high APRs. Both options can be incredibly expensive and come with the risk of trapping you in a cycle of debt, so consider taking out a credit-builder loan or improving your credit before you borrow.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over five 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 Lizzies. Elizabeth has found writing about innovations in financial services to be her passion (which has surprised no one more than herself).
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