If your credit score has tanked and fallen into the bad or poor category, getting approved for a personal loan is going to be tough.
A bad credit score impacts your financial life in more ways than you can imagine. Banks avoid you like the plague and payday lenders throw interest rates as high as 600% your way, making it nearly impossible for you to break free from the vicious grip of debt.
If you are wondering how you can get a loan with bad credit, read on. In this post, I list a few of the lenders in Canada who provide loans at competitive rates (i.e. compared to payday loans) to people with bad or poor credit.
Bad Credit Loans in Canada
A bad credit score is a credit score below 560. If you have recently declared bankruptcy, defaulted on multiple loans, or have gone through collections, it’s very likely that your credit score is now considered as ‘bad’ or ‘poor.’
In this case, most banks will not approve you for a loan or a credit card.
Not sure what your credit score is? Check it out for free here.
If your credit score falls in the 550-650 range, an alternative lender is your best chance at obtaining a personal loan. If your credit score is in the 660+ range, it is considered as ‘fair’ and some traditional lenders i.e. banks may approve you for loans.
Alternative lenders charge higher interest rates on bad credit loans. This is because they are faced with higher risks of loan defaults.
Best Online Personal Loans For People With Bad Credit
- Loan Connect: Borrow up to $50,000 for 6 months to 5 years and 4.6% to 46.96% APR.
- Ferratum Loans: Borrow up to $10,000 for 12 months to 5 years, starting at 18.5% APR (includes all fees).
- Borrowell: Borrow up to $35,000 for 3-5 years and pay up to 29.19% APR. A minimum credit score of 660 or higher is required.
- Refresh Financial: Borrow up to $25,000 for 3-5 years at 9.47% to 20.07% APR.
- LendingMate: Borrow up to $10,000 for 1-5 years and 34.9% to 43% APR.
- Mogo: Borrow up to $35,000 for 2-5 years and 5.9% to 45.9% APR.
Unsecured Personal Loans With Bad Credit
An unsecured loan means that you are not required to provide any collateral or security for the loan. They can be used to pay off credit card debt, serve as a car loan or be used for debt consolidation.
LoanConnect is Canada’s popular search engine for personal loans. Their portal links borrowers with multiple lenders who cater to individuals with bad to excellent credit scores.
The maximum loan available via the platform is $50,000. Loan terms range from 6 months to 60 months and the rates vary from 4.6% to 46.96% APR.
Many of their lenders offer instant approval and you can have funds transferred to your bank account in as little as 12 hours.
To apply for loans using LoanConnect, you must be the age of the majority in your province and a permanent resident or Canadian citizen.
Read my full LoanConnect Review here.
2. Ferratum Personal Loans
The Ferratum Group operates in 25 countries including Canada. They provide personal loans from $2,000 to $10,000 with loan terms ranging from 1-5 years and rates starting from 18.5% APR.
Their online loan application process takes about 10 minutes and you can have funds deposited in your account within 24 hours. Ferratum requires no document uploads or branch visits. There are no extra fees i.e. no origination fees and you can pay your entire loan off at any time.
To qualify for a Ferratum Personal Loan, you must:
- Be a Canadian citizen
- Be 20 years or older
- Be living in Ontario, British Columbia, Alberta, New Brunswick, Nova Scotia, or Newfoundland.
- Have a Canadian bank account, email address, and mobile phone
- Be actively employed with $2,000 or greater monthly income
Borrowell is an online Canadian lender that also provides free credit scores. As of 2019, over 1 million Canadians have obtained their credit scores through Borrowell.
They offer personal loans of up to $35,000. Loan terms are 3 or 5 years and the fixed interest rate ranges from 5.6% to 29.19% APR. Your application is completed online and approval may take less than 2 days.
To qualify for a Borrowell Personal Loan, you must:
- Have a credit score above 660
- Be a Canadian citizen or permanent resident
- Have a bank account in Canada
- Not have filed bankruptcy or a consumer proposal
You can read my Borrowell review here.
Mogo is a Canadian fin-tech company that is listed on the Toronto Stock Exchange and Nasdaq. The company offers personal loans, credit scores, identity protection, mortgages and cryptocurrency trading (Bitcoin).
Mogo’s online installment loan (MogoLiquid) offers borrowers up to $35,000 for up to a 5-year term. The interest rate on the loan is from 5.9% to 45.9% APR.
In addition to their MogoLiquid loan product, Mogo also offers:
MogoMini Loan: Borrow up to $35,000 at 47.42% AIR.
MogoZip Loan: The rates on this loan are as high as 250%, which puts it in the payday loan category. Avoid this loan!
Read my complete Mogo review here.
Secured Personal Loans With Bad Credit
If you are unable to qualify for an unsecured loan, a secured loan is your other option. Secured loans require you to put up collateral such as a personal asset like your car, home, jewelry, etc. In some cases, all you need is a guarantor.
One benefit of these loans is that they also report to the credit rating agencies (TransUnion and Equifax) which means you can use them to rebuild your credit score.
On the flip side, a downside of secured loans is that you can lose your collateral if you are unable to repay your loan.
5. Refresh Financial
Refresh Financial offers a Cash Secured Savings Loan. This loan is held for you in a savings account and your payments are reported to the credit bureaus. The funds are made available to you at the end of your loan term.
Approval for the Refresh cash secured loan is usually guaranteed (97% approval rate) and loan terms vary from 3-5 years.
LendingMate is one of Canada’s most popular guaranteed personal loan services. Whether you have bad credit or no credit, you can apply for a $2,000 to $10,000 personal loan and become approved within 24 hours.
Their loan terms vary from 12-60 months and the APR range for a LendingMate loan is 34.9% to 43% APR. To be approved for a loan, you must provide an eligible guarantor who is willing to sign a guarantee that you will pay back the loan. Approval rates are high at 95%.
Best Car Loan Rates For Good or Bad Credit
Getting the best car loan rates for your financial circumstances can be tough if you have to go shopping around at several banks. The challenge with this is that it is time-consuming and you may end up hurting your credit score due to several hard inquiries hitting your credit file.
A rate comparison site like Car Loans Canada allows you to make one free application that is distributed to over 300 lenders at the same time. Excellent, good or bad credit? They will send the best rate available your way.
7. Car Loans Canada
Car Loans Canada is Canada’s oldest online platform for finding the best auto finance rates irrespective of your credit profile. Applying for a quote via their website takes about 3 minutes and the entire approval process from application to getting your car can take less than 48 hours.
Loan rates range from 0% to 29.99% and you can borrow for up to an 8-year term. Car Loans Canada operates in Ontario, British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia, Newfoundland and Labrador, New Brunswick and Prince Edward Island.
Checking your rate is free. To be eligible, you must:
- Earn at least $1,800 per month in gross income (includes employment income, pension benefits, disability and other payments)
- Be a permanent resident of Canada
- Have a valid driver’s license
- Have a valid Canadian address
- Provide a void cheque from a Canadian bank
How To Fix Your Bad Credit
If you work on your credit rating and it improves, it will have a significant positive impact on your life. You will be able to access credit at much better rates and save money in the long run.
Before you can improve your credit score, you need to understand how it became bad in the first place. Some of the reasons for your bad credit rating may include:
- Late payments
- No payments
- Defaulting on a loan
- Filing for bankruptcy
- Collections or consumer proposals
- Identity theft or fraud
In order to improve or rebuild your credit score, you need to:
- Make loan or credit card payments on time
- Keep your credit utilization low
- Correct any inaccuracies on your credit report
- Keep old credit cards alive
- Vary your credit types
- Consolidate your debt
- Monitor your credit
- Not apply for too much credit
For more strategies on how to improve your credit score, read my article on 8 ways to raise your credit score fast.