You need cash. Unfortunately, you’ve made some financial mistakes in the past and now your credit score isn’t so hot. While having bad credit can certainly make it more challenging to borrow money from your traditional bank or credit union, there are options available for personal loans in Canada despite your credit history.
If you’re in need of money to help cover a small project, solve a financial emergency, or cover the bills on a short month at work, online loans in Ontario are available. Best of all, you won’t have to fill out a giant stack of paperwork or even leave the house to apply. Applying for personal loans for bad credit is far easier than you think, and far faster, too. Taking out a new online loan in Toronto can be started in just a few minutes online.
Understand how personal loans work
Your first step in applying for a personal loan is to simply understand what the loan can offer you and how the loan itself will work. When you take out money through a personal loan, the funds will be delivered once your application is approved.
You apply, the online lender considers your application, and once you satisfy if the lender’s criteria, you are offered the loan terms for your approval. You approve the loan terms if they are satisfactory and then you wait for the bank to fund your loan and deposit the money directly into your bank account. Once the funds have arrived, they are yours to spend in any fashion. The bank will typically use automatic withdrawals from your bank account to repay the loan.
Find an online lender to match your qualifications
If you know that your bad credit is going to cause problems with traditional lenders, don’t waste your time applying for online loans that aren’t a good fit. Instead, focus your efforts on finding the lenders who are comfortable lending money to those who don’t have great FICO scores.
Often you can find an online lender for bad credit by simply reading the requirements on their website or looking through the list of materials that is required for the loan. Payday loans and bad credit personal loans typically consider only income when you apply, not credit scores, which makes those loans a great fit for you if you have a steady job and a willingness to repay the money you’re borrowing. In fact, the use of payday loans has doubled in Canada over the last several years.
Find the necessary items before you apply
Once you find a loan that seems to match your qualifications, your next step is to prepare for the application. Don’t start the application before you have a chance to find what you need. Typically, an online loan application will require:
- Your bank statements
- Your pay stubs
- Your account numbers
- Your Canadian identification
- Your personal phone number, address, and contact information
Gather these items together and have them on hand when you apply for the loan. In some cases, the lender may request additional documentation to support your loan, especially if you are applying without using your credit score. This documentation might include tax statements or other financial documents to show your steady income and your ability to repay the amount that the lender is allowing you to borrow.
In other cases, you may be able to apply, fill it the necessary information from your documents, and see an approval in a matter of minutes. Every application is unique.
Check the terms of your loan carefully
Once you have applied for a new loan and the lender has approved your application, you’ll be offered terms. These terms are the monthly repayment amounts and the interest rate, or APR, of your loan. The lender will assign your loan an interest rate based on the risk the bank feels they are taking with your application.
You’ll also be given a number of payments and the corresponding amount for repayment. Be sure that you agree to the terms and that the numbers make sense for your financial situation. If you accept the terms of the loan and accept what is offered, you are locked into the loan and will be expected to make the payments, even if the amount is uncomfortably high every month.
Look for guaranteed approval
Some online lenders offer borrowers guaranteed approval or preapproved offers. These loans are targeted at borrowers with a certain credit score or perhaps a certain income if credit score isn’t considered for the loan.
With a preapproved offer, you can apply for the loan with confidence. You already know you should be set for borrowing, and most preapproved offers have more favorable terms as the borrower is considered less risk for the online lender.
Improving your credit score can improve your loan terms
If you can improve your credit score in the short term, you will see benefits when you apply for personal loans. A higher credit score means more guaranteed approval offers and better terms on personal loans. Your interest rate will likely decrease and that will reduce the amount of the monthly payments. It will cost less to borrow money.
It’s not always possible to improve a credit score in a short term, but in some cases, you can make quick improvements by checking your report for mistakes and reporting issues to have them resolved. If improving your loan in the short term isn’t likely, you can still look forward to better terms on future loans as your score improves.
Many personal loans are reported to the credit bureaus
While your bad credit might be frustrating for you now as you apply for loans, the bad credit personal loan you’re getting today will help improve your credit for the future. When you borrow money, the loan repayment is often reported back to the credit bureaus, helping to establish a pattern of good payments and decreasing debt.
Installment payments on personal loans make it easy to repay the full amount, diminishing the total amount you’ve borrowed significantly every month, and giving your credit score a bit of boost with each on-time payment as well.