Sandra MacGregor
Beth Buczynski 
It’s possible to get a personal loan with a low or bad credit score in Canada. However, personal loan borrowers with bad credit scores will pay higher interest rates, and possibly some additional fees.
Getting approved for a personal loan with bad credit depends on…
The type of lender
Not all lenders offer loans to those with bad credit, in fact, Canada’s Big 6 Banks generally only approve loans for those with a good credit score, typically 660 or above. If your score is lower than that, you will likely have to seek a personal loan from an alternative lender.
Your income
Even alternative lenders have minimum income requirements. Many bad-credit lenders like to see a monthly income of at least $1,200. Some lenders may also even require you to be employed for a set period of time, such as at least three months.
Your age
Most lenders will want you to have some form of official ID to prove that you’re the age of majority in your province or territory.
How to get a personal loan with bad credit
Here are some general steps to take to get a personal loan with bad credit.
Step 1: Know your credit score and history: Get a copy of your credit report and score to get a clear picture of the issues a lender will see when it pulls your credit.
Step 2: Research lenders: The first step is to do some careful research to find lenders willing to work with borrowers with bad credit. Pay special attention to their interest rates and fees, and try to apply only to legitimate lenders offering fair terms.
Step 3: Get pre-approved: Some lenders offer conditional approval, which can help you get a better idea of what kind of terms and interest rate you might get if you were to proceed. Pre-approval can make it easier to compare lender offers that are actually based on your financial profile.
Step 4: Gather your documents. Save time and hassle by getting your required documents together beforehand. This may include tax forms, pay stubs, bank account statements and official identification.
Step 5: Consider a secured loan or a co-signer. You may have a better chance of getting approved (and enjoy lower rates) if you apply for a secured loan by providing collateral. A co-signer like a parent or friend can help bear the responsibility of the loan, though it’s a lot to ask someone unless you’re sure you can manage the loan.
Step 6: Apply for the loan. It’s possible you could get approved within minutes and receive the funds the same day.
Things to watch out for when getting a loan with bad credit
There are often more risks and costs involved when working with a lender who’ll provide personal loans to borrowers with bad credit. Here are a few to be aware of:
- High interest rates. Generally, those with bad credit may be viewed as high-risk borrowers who are more likely to default on a loan. To make up for this lack of creditworthiness, lenders charge higher interest rates. Use a personal loan calculator to understand how the rate affects the total amount you’ll eventually have to pay back.
- Fees. Bad credit loans may involve a lot of extra fees, including things like application and originator fees, closing costs and penalty charges. Be sure the fees you’re quoted are reasonable and you’re willing to pay them.
- Confusing contracts. Payday loans and cash advances are two common types of personal loans use by folks with bad credit in Canada. Payday lenders often employ predatory practices. It’s vital to carefully read the fine print of your loan before you sign anything to ensure there are not any hidden fees or penalty charges that can add to the overall cost of borrowing.
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