Menu Toggle
  1. Home
  2. Loans
  3. Can I Get a Personal Loan with Bad Credit?
Published March 27, 2023

Can I Get a Personal Loan with Bad Credit?

Personal loans for bad credit are typically offered by alternative lenders, and have higher interest rates and additional fees.

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.

About the Author

Sandra MacGregor

Sandra MacGregor has been writing about personal finance, investing and credit cards for over a decade. Her work has appeared in a variety of publications like the New York Times,…

Read More
Cash Advance vs Personal Loan: How to Choose

Cash Advance vs Personal Loan: How to Choose

A cash advance and a personal loan are both ways to borrow money. While a cash advance is a short-term high interest loan, often used to cover emergency expenses, a personal loan usually has lower rates in comparison, and is paid back over a longer period of time. Deciding whether a cash advance or personal […]

8 Do’s and Don’ts of Personal Loan Repayment

8 Do’s and Don’ts of Personal Loan Repayment

Credit card spending is back with a vengeance in Canada. For consumers with a credit card, average monthly credit card spend was almost $2,447 in the third quarter of 2022, according to Equifax Canada’s most recent consumer trends and insights report. That’s up by 17.3% when compared to the third quarter of 2021 and up […]

How Do I Get a Personal Loan? Cost, Eligibility and Credit Score

How Do I Get a Personal Loan? Cost, Eligibility and Credit Score

Personal loans may not have the complicated qualification requirements of a mortgage or home equity line of credit, but there are still certain criteria you’ll need to meet to be approved.  If you’re considering a personal loan to meet your financing or debt consolidation needs, make sure you understand the costs, eligibility requirements and minimum […]

How to Get a Credit Card in Canada When You Have Bad Credit

How to Get a Credit Card in Canada When You Have Bad Credit

Your credit score is one of the most significant pieces of information that affect your financial life. With a good credit score, you’ll likely have no problem getting access to credit cards, loans or a mortgage. However, if you’ve made some financial mistakes in the past, your credit score could be low, which might limit […]

Back To Top