Loan Articles


Although Canada has already started recovering from the heavy blows of the global financial crisis, the number of people with bad credit in the country is still considerable. Canadaís top-five banks have unanimously accepted that a borrower should have at least an average credit score so as to be approved for a personal loan. Those with a credit score below the average will experience certain difficulties in finding a lender, who will agree to give them a personal loan, but the mission still isnít impossible.

A number of lenders in Canada have chosen to work with problematic borrowers (ones with tarnished credit scores), justifying the high risk they take with the considerable interest rates and fees that they charge.

Before approaching such a lender (be aware that some of them are not to be approached at all because they are loan sharks) you should try to find the personal loan deal that will work best for you. Remember that a personal bad credit loan is meant to help you improve your financial situation and not to further aggravate it.

Generally, bad credit personal loans fall into two main categories and namely secured and unsecured ones. Borrowers with bad credit are often required to produce collateral (a piece of movable or real property), with which to guarantee that they will be paying their creditor on time every month. Such loans are called secured personal loans. Lenders are more willing to give out secured personal loans, as they automatically take possession of the collateral, should the borrower default or delay one or two payments.

Unsecured personal loans for people with bad credit seldom exceed $5,000, and they always go with a high annual interest rate and service fee.

Needless to say, you should check for and correct any inconsistencies in your credit report that may lower your credit score further, prior to filing your personal loan application.

From a purely technical perspective, applying for a bad credit personal loan is a fairly easy process, as most of the lenders accept online applications. Paper work may be required if you apply for a secured personal loan, as the collateral must be assessed by an expert, and its value should be written in the loan contract.

If you have shown malfeasance recently (declared bankruptcy), or your credit score is terrible, your options for obtaining a personal loan may be very limited. You may have a higher chance of qualifying for a restricted or high interest credit card compared to a personal loan.

Keep in mind that every time a creditor checks your credit report, this is recorded. Your credit rating may be further affected if multiple checks are being done. It is a good idea to bring a recent copy of your report along when you discuss your options for personal loans with various lenders. This way, you will get an idea of your chances to get approved before they pull a copy of the report. Even if that doesnít help, your situation will not get any worse as you are avoiding multiple credit checks.

Finally, remember that bad credit personal loans are a good solution only in emergency situations. They should not be used for buying big-ticket items, such as a new vehicle. Personal loans for people with bad credit typically put them at risk of mismanagement and default. It is, therefore, better to clear up some debt first, before applying for another loan.