If it’s not an emergency, the first step to get a loan with bad credit in Canada is to improve your score so you can comfortably afford the loan you need. Whether short term loans or personal loans for bad credit, Canada and certain institutions will be more welcoming if your score, and thereby your reputation, are strong.
Start by making timely payments, especially on your credit card and reduce balance to under 30% of your limit. And don’t apply for new credit. These three factors account for 75% of your credit score so it is vital that you understand the impact they could potentially have on a strong credit score.
If it is an emergency however, there are measures you could take to get bad credit loans in Canada that do not involve banks, credit unions or even the alternative sources that we have already mentioned.
- Borrow From Family/Friends
This is risky from a relationship standpoint, but makes a lot of sense from the financial and loan-anxiety perspective because it should be easier to get approval and a break on terms.
Family and friends aren’t likely to put you through the grueling qualifying process and would probably be lenient with the interest rate compared to what you would get from lending institutions that make personal loans for bad credit in Canada.
However, if you get a loan for bad credit in Canada from your friends or family, make sure to factor in what happens if you default. Not repaying a loan to a relative or close associate can be toxic to relationships in ways that go far beyond a bad credit report.
Treat any loan from someone you know as if it were a business transaction between you and a stranger. That means it should be formalized with clear documents and legally recorded. To avoid future problems, create a written contract that includes the loan terms and interest rate, and what happens if you cannot repay the debt. While you are getting a loan from a friend or family, you should not treat it as such.
If you cannot get a loan with bad credit in Canada from friends or family, you can still approach someone you know with good credit about co-signing on for a bad credit loan.
With a qualified co-signer, the lender will set the loan terms based on the credit score of the person with good credit, who will then be equally responsible for repayment. You can think of a co-signer as a sort of character witness.
All payment information will be recorded on both your credit report and your co-signer’s, so if you default on the loan, or you’re late with payments, you both suffer. There is more responsibility on your shoulders because your actions have direct consequences for someone else. However, if you make timely payments, your own score will improve, making it easier to obtain future loans without a co-signer.
For example, if you need a short term loan in Canada and bad credit is affecting your ability, Lending Mate provides you with up to $10,000 provided you have a guarantor. They have a chat over the phone with both you and your guarantor and make their decision based on what they find out and using common sense.
It is a less taxing qualifying process when considering what certain institutions put you through when applying for personal loans for bad credit in Canada. But there is a lot more responsibility put on you.
Technology and a schism in the marketplace have created a space for Personal Loan Lenders, a new industry that has created an option for people with low credit scores.
These lenders are essentially banks that don’t have offices. In our context, this means online loans in Canada. They do their work online and offer online loans in Canada for bad credit scores when it comes to things like credit card debt consolidation and home repairs.
Their primary appeal is that they work fast and have funds at the ready. They can make their decisions in minutes and deposit funds in an account in a matter of hours or days. Many have no application fees or pre-payment penalty.
When considering online loans in Canada for bad credit, these agencies are your go-to. Online personal loan applications are simple and easy to fill out. Credit scores are only a small part of the decision-making process so this is an appealing option for people with bad credit scores. Other factors considered include your education and employment history.