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Unsecured Personal Loans For People With Bad Credit In Canada
It is a well-known fact that getting a secured loan is always easier than getting unsecured loans. Plus getting unsecured personal loans for people with bad credit in Canada is even a lot harder because the borrower has bad credit.
The reason is quite easy to understand why lenders prefer secured loans to unsecured loans, and this is because they have some security they can fall on when there is a default. Every lender who gives out a loan does so with the intent of making profit so sees the loan as some sort of investment and no one wants to invest knowing the risk is high.
Apart from security, other factors are considered by lenders before approving a loan. These factors, however, do differ from lender to lender, they include a borrowers credit score, income, debts etc. If a borrower has a bad credit, he or she is very much aware that getting unsecured personal loans for people with bad credit in Canada is a very tedious task.
Most lenders check a borrowers credit score to know if he or she is creditworthy so they don’t put themselves/organizations at risk. A bad credit score is, therefore, a stumbling block to most borrowers because their applications are rejected by most lenders such as traditional banks and non-bank financial institutions.
Thanks to alternative lenders, there is hope for people seeking unsecured personal loans for people with bad credit in Canada.
Unsecured personal loans
Unsecured loans mean taking a loan with no collateral attached to the loan. A bank or any non-bank financial institution that offers a borrower an unsecured loan does so not expecting or requiring a guarantee for the loan.
This means in the case where the borrower defaults on an unsecured loan he or she will not be worried about losing a property to any lender. There is no immediate loss for the borrower, however, there will be future consequences the borrower will have to face with regards to charges or even increased interest rates.
Any lender who gives unsecured loans is actually taking a risk with the borrower since there is no property to rely on but on the person’s creditworthiness. The best way most lenders use to get back their money in case of default is to use the legal system or collection agencies.
Another way lenders use to cushion themselves from all the risk attached to unsecured personal loans for people with bad credit in Canada is to charge high interest rates. This means interest rates on unsecured personal loans for people with bad credit in Canada are much higher as compared to that of secured loans.
For a lender to grant a borrower unsecured personal loans for people with bad credit in Canada, he or she must have a good credit score. However, if the credit score of the borrower is bad there may be lenders who will be willing to give them a loan but the borrower may have to pay a higher interest rate than if the credit score is good.
Lenders who give credit to borrowers with bad credit
It is a well-known fact that most lenders who give credit to borrowers with bad credit history do not conduct a search on these borrowers from the credit bureaus because their credit is obviously not in a good standing.
The focus for such lenders is whether the borrower gets a salary or if he or she can show proof of earning an income, instead of whether the person has a good or bad credit history.
With this, the lender is convinced the borrower will be able to pay back the loan when granted. Most unsecured personal loans for people with bad credit in Canada come from private lenders rather than the traditional lenders who consider such borrowers risky.
Borrowers with bad credit prefer private lenders because their requirements are not too stringent and can be easily provided. Traditional banks and other financial institutions have requirements which we can say are a bit sophisticated and this is because these banks and financial institutions are working under regulations.
Another thing is that private lenders most of the times have a closer relationship with their clients than the traditional lenders. Due to this they can easily make some requirements slide and adjust to meet the needs of bad credit borrowers.
Is it possible to improve your credit with unsecured personal loans
There are a lot of borrowers who want to clean their credit score or repair it or rebuild it all together but don’t know how to go about it. The question that is most ask is “how do I repair or rebuild my credit score?”. Well, one of the solutions is to get unsecured personal loans. How it works is that when you get unsecured personal loans for people with bad credit in Canada and begin to pay back, you use that to rebuild your credit.
Most borrowers find it hard to pay back are loans which have very high interest rates such as payday loans. Since unsecured personal loans for people with bad credit in Canada have a lower interest rate as compared to payday loans, the borrower can consolidate all the loans and take an unsecured personal loan to pay back.
This arrangement helps a borrower pay back the loan since the payment will be in installments and at a lower interest rate. By paying back the loan gradually and on time, the credit score is being rebuilt and gradually repaired completely.
Hopefully, if you had no idea you could take unsecured personal loans for people with bad credit in Canada to repair your bad credit, now you know. If having bad credit has discouraged you from seeking for a loan, this is the right time to consider going for a loan to help repair that bad credit so your choices for credit in future will be many.
If you want to use unsecured personal loans to build or rebuild your credit, here are the do’s and dont’s
Building or rebuilding one’s credit scores involves taking a loan or credit and paying it off at the stated time in the agreement.
The truth is there are several ways such of getting unsecured loans for people with bad credit in Canada. But because people are not aware they rather go in for credit cards. The catch with the credit card is that it has a high interest rate which will not be the best considering the fact that you want to build good credit.
Rebuilding a credit means the credit already has issues with it and a credit card can easily add on to the mess if not handled well. On the other hand, using an unsecured personal loan to build or rebuild credit is much better since the interest rates are relatively lower than credit cards.
Here are some of the dos and dont’s to consider:
Don’t go overboard when applying for loans
Some have the notion that spreading their loan search widely will help with them at least getting one lender approving their request. Big mistake!
The more loans you ‘shop’ for the more your credit rating is damaged. To avoid this scenario, investigate properly to be sure which lender that you are confident with who will give you credit considering your bad credit status as well as meeting their requirements.
You can find the best rate by searching online
The truth is that going online to search for the best rates, proves overwhelming but don’t get convinced easily. Make sure to do a thorough search online until you are sure your choice is best among the rest.
You will save yourself a few dollars if you take time with a little patience to do some more search. Another trick is to also do this search when you don’t need money immediately, so as not to rush into making a decision on a lender because you are desperate.
The terms and conditions of a loan are very important
This stage means your request for a loan has been accepted and you will need to sign the papers for the loan to be approved. This is a very important stage a borrower must not rush through. Read carefully all the terms and conditions and even the small prints. You would not want to be surprised with an additional section which had some costs that escaped you because you rushed through the terms and conditions.
As soon as the agreement is signed it means you agree to all the terms and conditions. So sign only when you are sure you understand everything written in the agreement.
Note; pay attention to penalty charges for early repayment as well as the penalty for default. Not that you plan on defaulting but just to be sure what you are signing on to.
Make payments on time
By now if you are a borrower, one factor that you should know affects your credit is your payment history (This can be that your repayments are on time or repayments are delayed).
Never assume as a borrower that delaying ones own repayment will not affect your credit score, because it really does. When you take an unsecured personal loan, the lender will give you a repayment schedule to guide your repayments. Make sure this repayment plan is adhered to religiously to avoid marring your credit history.
In as much as a repayment schedule is given to you, there might be days repayment will delay because of unforeseen circumstances. The best thing to do is to speak to your lender to explain the situation at hand.
You and the lender can then come up with a plan to work that out, instead of not saying anything and allowing that delay to be put on your records.
Borrow just what you need
Sometimes when borrowing money the temptation to request for more than you need is there because you feel you can easily pay back. The best advice is to stick to the amount that is really needed to sort whatever financial problem that instigated the loan in the first place.
Lenders sometimes approve amounts that are more than you requested. Make sure to accept just the amount you requested for. There is no need accepting more than you requested to add on to your debt or better still if you are now building your credit no need to start with too much.
Don’t add more debts because you qualify for it
The more you build up a good credit history, the more you are eligible for more loans.
Don’t be deceived into taking on more debts because you qualify for it. Why create more debt for yourself when you can easily stick to one and pay it diligently.
Is There Guaranteed Approval for unsecured personal loans for people with bad credit in Canada?
Many lenders use guaranteed approval to advertise their services to entice more people to choose them. There is no loan that is guaranteed approval until the borrower meets all the requirements.
Most of these lenders require a borrower to show his or her pay slip to prove that there is some income coming in. The guaranteed approval phrase simply means the lender is not discriminating against the borrowers, so whether your credit history is good or bad you can apply. What the lenders of such guaranteed approvals need most is that you prove you have the means of paying back the loan and not your past credit history.
However, whether your loan request is approved is another story altogether. This also goes to show that these lenders have more relaxed requirements as compared to the traditional banks and financial institutions.
How to Get Unsecured Personal Loans for people with Bad Credit in Canada
To be able to get unsecured personal loans for people with bad credit in Canada, you should start by comparing rates, types of loan available, lending conditions, types of collateral accepted, repayment schedules etc. are just but a few criteria lenders look out for.
Lenders who give unsecured personal loans for people with bad credit in Canada usually request for employment details such as monthly income, employer, position held in the company, number of years working for that company etc.
If the lender asks for a co-signer he or she must also provide proof of income, basic information like age, marital status etc. as well as employment information.
More information that has to be provided by the lender include the number of dependents, social security number, mortgage payments if applicable and so on.
The information requested by these lenders is to make sure that the loan that is approved will be paid back regardless of the borrower’s credit history and at the time agreed by both parties. If you are considered very risky, no lender will want to lend to you. The lenders will always require information from you on your employment status so as to know if you are financially able to pay the loan back.
With all that information, if you want lenders to give to you, you should ensure that you do not have too many debts that you are servicing. It sends a message to the lenders that you can default on the loan and they will not be willing to lend to you.
Do bad credit scores stay on a borrower’s records forever?
Making mistakes with regards to your credits can sometimes not be avoided. These mistakes will cost you but fortunately, the good news is that this mistake will not be on your records forever.
In Canada, there are a number of factors that may influence how long your bad credit will be on the credit report before it ‘disappears’.
Some of these factors are your location, the kind of negative information reported by the lenders to the credit bureau, also the credit bureau that has this information on you.
The two major credit bureaus in Canada are TransUnion Canada and Equifax Canada. Both of these credit bureaus keep a bad record of a borrower in their records for as long as six years.
However, Equifax Canada keeps the information from the last payment date, whiles TransUnion Canada keeps the information the date when first default was made.
Materials that affect a borrowers credit information
Lenders send information of all transactions of a borrower with regards to all kinds of borrowing made to the credit bureaus. Examples of that include lines of credit as well as credit card accounts.
All loans that are given with collateral attached to it, such as cars or a house etc are all recorded on a borrowers report. How well a borrower services a secured loan or otherwise will all be on his or her credit report.
When a borrower has a savings account or a cheque account but has several cheques being ‘bounced’ or savings account closed because there is a debt, the lender reports this to the credit bureau. This contributes to their credit information.
If a borrower owes money through the courts after losing a case, such information can be on a borrowers credit report since credit bureaus get information from the courts too.
Credit bureaus also get information from debt collection agencies. These agencies have information on borrowers who have defaulted in paying off their loans so lenders have sent their names to the agencies to help with the collection.
When an individual declares him or herself bankrupt, it means he or she is not able to pay off the debt they owe. Such information’s are all given to the credit bureaus and constitute part of your credit history.
Materials that affect a borrowers credit information continued
Credit inquiries by lenders
When lenders or other organizations that have the mandate to check on an individuals credit score do that, it goes against that individual. Equifax keeps such searches ,for example, from a search on their report for three years whiles TransUnion keeps such information for six years.
It is wise for borrowers seeking loans to be careful when searching for loans since it usually affects their credit rating. They have to make sure lenders they seek loans from conduct soft credit searches instead of hard credit searches.
Positive credit information
A persons credit score is a big deal especially when there are plans for taking loans and there are different lenders to choose from . Taking ones credit score lightly ultimately means putting the future loans in jeopardy.
An individuals credit score affects almost all aspects of the persons life. From a cell phone plan, getting a job to getting a mortgage. To avoid all the above mentioned a borrower should try as much as possible to rebuild his or her credit or better still repair the credit.
This can easily be done by taking a loan and paying it back on time and religiously as agreed by both parties. Fortunately, both Equifax Canada and TransUnion Canada keep positive information of individuals on their reports for ten years. This is definitely a reason to have good credit.
How to get an unsecured personal short term loan
Short term loans have a limited tenure or for lack of a better word, loans that have a short ‘lifespan’. With the definition of short-term loans out of the way, we can now focus on how to get a short-term personal loan in Canada.
Several channels are available to get a short-term personal loan but if a borrower has a bad credit it will make it a bit more difficult to get than someone with good credit.
With good credit, the borrower can start his or her search from the traditional banks and financial institutions. Having bad credit, these financial institutions are likely to reject the applications.
This is because, for the traditional banks and financial institutions, there are several rules and regulations they abide by. Having bad credit will mean a borrower will not meet some of these requirements.
With that said if the borrower has bad credit, he or she can have alternative channels that can be explored for the loan. The advancement in technology has made it very easy for alternative lenders to offer their services to a wider range of individuals.
There are so many alternative lenders online who are more than willing to offer their services to borrowers who seek unsecured personal loans for people with bad credit in Canada. Applying for a loan online is easy because paperwork is absent and most of the time no credit checks are conducted on clients.
It feels like its impossible to get credit when your credit score is poor but that is not the case. Unsecured personal loans for people with bad credit in Canada is available. Many online lenders are willing to give loans to borrowers with bad credit.
Going online will open your eyes to so many options with regards to lenders who are there to offer their services.
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.