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Personal Loans In Canada With Bad Credit
There are so many personal loans in Canada for people with bad credit. The lending market has evolved so much that options for personal loans in Canada with bad credit has become a common search for most borrowers who have bad credit in Canada.
The most common or well-known type of loan in Canada is personal loans. If a borrower has a good credit history, getting a personal loan is easy. On the other hand, having a bad credit history can make it difficult for a borrower to get credit.
Fortunately, there are several alternative lenders who give loans to borrowers with bad credit in Canada, unlike the traditional lenders who hardly take the risk with bad credit history borrowers.
When borrowers with bad credit take loans and pay in installments at the end of every month regularly, they will be able to rebuild their credit score. Having bad credit can be classified as a risk to most traditional banks and non-bank financial institutions.
Getting your financial life back on track might sound easy, but the truth is it is not. You have to make a conscious effort to repay the personal loans taken at the agreed time and amount. This will take quite some time but eventually, you will be able to rebuild your credit and this will make you eligible for a higher amount of money from even traditional lenders.
Why some people choose personal loans
Ideally, no one will want to borrow money from anybody let alone a financial institution. But we are not able to do that because sometimes at one point in time in our lives we will need money urgently because we are short of money or the money available is not able to take care of the emergency. That is why personal loans is as an option to those who need them.
In Canada, a personal loan comes in as the best kind of loan you can go for to be able to handle that emergency financial need. Apart from the fact personal loans in Canada are the go-to loan, it is also safe and comparatively cheaper than credit cards or payday loans.
A personal loan from a traditional bank or non-bank financial institution or even private lenders do not have any restrictions attached to them so a borrower can use it for what he or she deems fit. People may need it for home renovations, paying medical bills and other personal costs that they have.
What to bear in mind is that you will be paying back the personal loan so using it for fun trips or leisurely activities will cost you since you will be paying it back with interest. If you take personal loans in Canada with bad credit, it can mean you will pay back at a much higher price depending on the negotiation with the lender, so be wise about how you use a personal loan.
It is good to note that personal loans in Canada with bad credit come with interest rates that vary from lender to lender. Depending on how much you need, you can negotiate for the rate that best suits you.
What is a personal loan?
A personal loan can be easily described as a loan that is received from a bank or any financial institution, to be paid back with interest within a period of time. These personal loans are loans that can be used for anything the borrower wishes. Unlike loans such as mortgage loans, car loans etc.
Another characteristic of most personal loans is that they do not have any collateral attached to them. This is actually one of the reasons why most lenders prefer it. Because just in case of default, the borrower will not lose any property.
Although personal loans are usually unsecured and are much more expensive as compared to secured loans, they are still the preferred choice. In as much unsecured personal loans are expensive, they are not as expensive as credit cards and payday loans.
If you have a few loans you are servicing individually, you can take a personal loan and consolidate all the loans and use the personal loan to pay off the loans. With this, you will have only one loan to concentrate on and to pay back. This makes paying back the loans easier and convenient.
You will not have several lenders ‘chasing’ you for their money at the end of every month, but one which you can concentrate on.
Lenders who give personal loans in Canada
Personal loans are one of the common kind of loans most lenders give. However, personal loans in Canada with bad credit, cannot be found as part of the major loans being given by traditional lenders like the banks, credit unions and non-bank financial institutions.
The simple reason is that these banks and non-bank financial institutions are governed by rules from the central bank and the government and so cannot give out some loans.
Another reason is that it is quite risky lending to bad credit history borrowers, considering their bad credit history. And since the banks and non-bank financial institutions are set up to make profit and not loses, they are careful who they lend to in order to avoid being penalized by the central bank or other governing bodies.
Apart from traditional lenders who give personal loans, there are other lenders who give personal loans as well as bad credit personal loans to borrowers who have credit scores which are less than good.
These lenders are known as private or alternative lenders. They are not regulated and sometimes those who fall under the regulatory bracket do not even license their companies.
Private lenders do take the risk to give out personal loans in Canada with bad credit because they charge very high interest rates that make up for the risk they are taking.
What most of these private lenders are more interested in is for the borrower to be able to prove to them they can pay back the loan ( proof of income). This has opened up the way for more people to fall into the category of being eligible for a loan. All those bad credit history borrowers now have hope to access loans.
Types of personal loans available to borrowers in Canada
Basically, there are two types of personal loans available to those with bad credit. They are secured and unsecured personal loans. Some lenders, usually the traditional lenders, do ask for collaterals, whiles most private lenders do not ask for collaterals for the personal loans they give out.
Those who ask for collaterals do so as a security to the money they give out. The collaterals asked for are typically much higher in value to the loan granted or they will be the same level with regards to value to the money loaned.
Lenders who do not ask for collaterals sometimes request for guarantors or co-signer of the loan. These people must have a very good credit history and also in good standing to be able to pay back the loan just in case the borrower they guaranteed for defaults.
On the other hand, when a lender gives a loan which is unsecured, the borrower does not need to bring any form of collateral. No collateral is needed, but interest is very high to take care of the risk the lender is taking.
As a borrower who wants personal loans in Canada with bad credit, you must be able to show the lender that you can pay the loan by filling the application form with employer details. Also, you must show proof of income.
Lenders who give secured or unsecured personal loans have what they look out for in a borrower to be convinced that the loan going out will be paid at the agreed time.
Types of personal loans available to borrowers in Canada continued
Lenders who give secured personal loans look out for collateral that is more expensive than the loan being given or as close to the amount being loaned as possible to avoid risk.
To get unsecured personal loans in Canada you may have a high-interest rate to pay. Lenders also require information from the borrower with regards to their basic information as well as employer information.
This is to help lenders know where to go when the need arises. All lenders are in business to make profit, the only difference between the traditional lenders and the private lenders is that one takes risk the other does not.
The traditional lenders are very careful when giving personal loans with bad credit. This is to avoid all the risk associated with lending whiles private lenders are likely to take all the risk as well as make more profit from their borrowers who want personal loans with bad credit.
How possible is it to get personal loans in Canada with bad credit
In the past, you can only get a loan when you have a very good credit history or when you use collateral to get a loan. During this time if you take a personal loan and default that is it for you because all the other traditional lenders will not lend to you because of your previous history.
This trend has changed over the time because of private lenders who have come into the market and take the risk to lend to borrowers with bad credit history. Being creditworthy was very essential for a borrower to get a loan. Now with or without a good credit history, it is possible for you to get a loan.
The only issue with getting personal loans in Canada with bad credit is that the interest rate on your loan is far higher than that of someone who is creditworthy.
Traditional banks do not take chances with the creditworthiness of its borrowers. What they do is conduct credit checks from the credit bureaus.
In Canada, there are two major credit bureaus; Equifax and TransUnion.
The banks and other financial institutions conduct credit checks from these credit bureaus to get what they call a ‘credit report’ to check the credit history of the borrower.
If you have a good credit history which will show on your report, the lender will go ahead to consider you for a loan. However, if you have a bad credit history, the lender then can either take the risk of lending to you or not. In most cases, the traditional banks and financial institutions do not go ahead with the loan application you put in.
A few reasons why you need personal loans in Canada with bad credit
We all need money to take care of some financial issues at one point in time.The reasons needing a loan will differ from borrower to borrower but there are some common reasons why most borrowers go for personal loans in Canada with bad credit.
• Pay for medical expenses
There are some medical expenses we can save for, others happen so suddenly and must be taken care of immediately. When it happens money is needed and personal loans are the best type of loan you can take that is fast and reliable.
Sometimes you might have the money but it is just not enough for the particular medical expense so you need a top up to be able to take off that medical expense.
• Home improvement
Home improvement is needed at some time in life. If you are able to save for that, even better. However, if you are not able to, taking a personal loan can help cater to that home improvement expense.
Take note that if this home improvement can be put off for a couple of months until you save enough for it, then do it. Because taking a personal loan comes with interest rates so if it can be avoided, then so be it.
• Consolidation of loans
Taking several loans and having to pay all those loans at the end of the month can be stressful if not inconvenient. You can take a personal loan to cover the amount equivalent of all the loans you have to pay them off.
The loan then becomes one and will have all your concentration and effort towards paying it off without interferences from other lenders.
• For the down payment of a new home
Most lenders cannot afford the requirements for a mortgage or even may not qualify for a mortgage but will qualify for a personal loan. What you can do is to take a personal loan to use as down payment for a house. Mortgages have very long tenure but personal loans do not have that long tenures.
So you can take the personal loan and use it for your home purchase or expense, pay it off and then take another one.
• Wedding expenses
We have to be frank, weddings are expensive and if you want to save towards it, you might have to wait for a very long time to get married to the love of your life. A personal loan can easily make this happen. Get a personal loan to take care of your expenses and then pay back gradually over a period of time without stressing yourself too much.
• Buying a car
A personal loan can help you get a car if you do not qualify for a car loan or cannot afford to buy a car with your own cash.
Can anyone get personal loans in Canada
To be eligible for personal loans you have to have the below
• Have a bank account
Having a bank account alone is not a priority, but having an active bank account so that the money can be put in your account when it is approved is needed. If your account, is inactive you will not get the money and this will delay the process and this can affect you considering you came for the money for a particular pressing reason.
When giving your bank account to the lender make sure you check whether you are giving the right account number.
• You must be eighteen and above
Being below eighteen automatically disqualifies you for a personal loan in Canada. To be able to get a personal loan, you must be eighteen years or above eighteen years.
• Have to prove your income
Because you will not be using collateral to stand in place of the loan, you will need to prove your income. You can do this by showing a month or three months’ pay stubs. To the lender showing proof of income also shows that you will be capable of paying back the loan.
• You have to be a Canadian resident
You have been a resident in Canada to be able to take a personal loan in Canada. If you are not a resident, then you don’t qualify.
• Proof of residence in Canada
You have to provide proof of residence, such as utility bills so the lender knows you really live in Canada.
• Proof of identity
Showing some kind of ids such as drivers license, national ID card or a passport. All of these are ids with your photograph.
Pros and Cons of personal loans in Canada with bad credit
Below are a few advantages and disadvantages of personal loans in Canada with bad credit.
•It is easy to access personal loans especially if your credit history is good. If you have a bad credit history and you need a personal loan, you can get the personal loan but at a much higher interest rate.
• When you meet all the requirements of the lender, approval of personal loans are fast. You can get the loan within a few hours or sometimes or latest by a day.
• There are no guidelines as to how and what to use the money for. For personal loans, the borrower is the one who chooses what he or she wants to use the loan for.
• You can use personal loans to build your credit if you haven’t taken a loan before. Or you can use a personal loan to rebuild your bad credit.
• If you have more than one loan, a personal loan can be used to consolidate those loans so you will have only one loan to service. Instead of having loans with different lenders all expecting you to pay the loan at the end of the month. With only one to service, you can concentrate on servicing it properly so you don’t spoil your credit report.
• Most traditional lenders will give you a personal loan if you are creditworthy or have collateral to put in place of the loans.
On the other hand, if your credit history is bad, traditional banks and other financial institutions will reject your application.
• Some loans come with lots of charges but all the charges are hidden, examples of such loans are payday loans.
If you don’t get to see these charges, your repayment will be more expensive than you envisaged.
Monthly repayments can be on the high side, so make sure you can afford to pay the monthly repayments otherwise you will find yourself in a fix.
• If you have a bad credit history, then you will only get a personal loan at a much higher rate than the usual rates given to a borrower with good credit
Personal loans in Canada with bad credit have become quite common because of the emergence of private lenders. Lenders who have usually not seen giving personal loans to people with bad credit a bad thing continue to do so because they also want to get the market of bad credit history borrowers to their sites.
The traditional banks, however, are still reluctant to give loans to bad credit history borrowers to protect themselves from all the risk bad credit borrowers come with. Fortunately, private lenders like Afterloans have been able to bridge the gap between bad credit borrowers and loans.
If you live in Canada and need an urgent loan but don’t have good credit you should get personal loans in Canada with bad credit loans that can help you solve your financial problems as well as rebuild your credit history.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. You can borrow up to $20000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.