How to Get A Personal Loan with Bad Credit

Posted on July 19, 2021

Life happens. 

Maybe that student credit card you signed up for years ago has finally caught up to you.

Perhaps you're dealing with overwhelming medical bills or past-due accounts. You've had late payments, but are ready to get back on track. 

It's even possible for you to have little to no credit whatsoever. You're struggling with this fact, as lenders are unable to find any sort of paper trail to deem you "trustworthy." 

Now that you're in need of funds, your credit score might have seriously inconvenient consequences if you're wondering how to get a personal loan with bad credit.

Despite the circumstances, you may have options. Keep reading for our guide on how to identify and apply for loans with bad credit. 

Is It Difficult to Get A Loan with Bad Credit?

A credit score is a number that usually ranges between 300 and 850 that essentially symbolizes your debts and trustworthiness in paying back those debts. While one's credit will fluctuate throughout their life, making on-time payments and minimizing your debt-to-income ratio will help maintain a good store. 

If you have never opened any kind of account before, you have little to no credit history. Those with little to no credit history may have a low credit score. 

Standard Credit Score Chart

A standard credit range typically looks like this: 

  • 300-549 - Bad 
  • 550-619 - Poor
  • 620-679 - Fair
  • 680-739 - Good
  • 740-850 - Excellent 

A low credit score can make it difficult to get approved for a credit card, sign a rental lease without a co-signer, sign up for a phone plan, buy a car, or get a loan. This is because the number symbolizes your performance in areas like: 

  • Credit history age
  • Number of accounts open
  • On-time payments
  • Quantity of hard inquiries

A credit score of 500 or below may make it difficult to find the right personal loan. As you learn to manage your debt, it's important to weigh all of your options, loan terms and interest rate offers before signing on the dotted line. 

Remember, applying for any kind of personal loan will usually appear on your credit report as a "hard inquiry"-- or, a record that indicates you applied for a new line of credit. You may be able to find a "no credit check loan," that assesses your proof of income and current debt, but be sure to do your research in order to avoid common scams.

This type of loan will almost always come with high interest rates or additional fees to make the deal worthwhile for the lender. 

While approval is never guaranteed, most loan companies that service those with bad credit will work with borrowers to find the right loan that fits their needs. Be prepared to provide some sort of income statement or proof of employment, and avoid scams that seem too good to be true. 

What Are the Interest Rates Like?

Because lenders consider a low credit score to be "high risk" criteria, the interest rates available to them are typically much higher than those with a good credit score. Improving your credit score is the best way to improve the interest rates available to you. 

The average personal loan interest rate for an applicant with bad credit can be as reasonable as 4.6% and even as high as 47%! Additionally, you may be stuck paying the loan for as long as the established term -- those with bad credit may not have the ability to pay off a loan early in order to avoid interest payments. 

If this is your first personal loan, you might wonder if your interest rate will increase if you miss a payment. 

While the standard APR will remain consistent, you may be hit with a penalty APR and end up paying more in interest as the interest compounds.

Additionally, missed payments will be reported to the credit bureaus, which can only do further damage to your current credit score. Choose your personal loan wisely to avoid being locked into a payment agreement that you cannot reasonably afford. 

What Companies Offer Loans for Bad Credit in Canada?

Most traditional banks try to avoid approving personal loans for bad credit. In this scenario, it's best to review web-based companies that have a track record with low credit scores. There are a number of bad credit personal loans in Canada with good reviews. 

Loan Connect logo


LoanConnect allows applicants to compare the APR, loan terms, and loan types for those with bad credit. Most loan options through this search engine do not require a hard credit check for borrowers. With loan amounts between $500 to $50,000 and a fast direct deposit, this is a great option for those with a reasonable profile and a desire to weigh all loan options. 

loans away logo

Loan Away

Even though their approval isn't guaranteed, you have a good chance with Loan Away. With approval rates of over 90% of all loan applications, Loan Away is a great personal loan option for those without any bankruptcy records or proceedings. 

The application process takes less than ten minutes. Once approved, funds can be available within 24 hours.

lendingmate logo


LendingMate is a Canadian company that specializes in providing loans for any credit score. They're known for their expedited processing times and do not charge any additional fees outside of loan APR. 

When an application is received, Lendingmate looks over the borrower profile to determine a custom plan. Loan amounts of $2,000 to $10,000 are available with a maximum of 43% APR. 

loans canada logo

Loans Canada

Loans Canada is a popular option for Canadians with bad credit, as it is an indirect lending service that specializes in connecting borrowers with bad credit lenders. It's possible to find a reasonable rate with an average repayment term of 60 months.   

What Are Examples of Small Loans I Should Avoid?

Remember -- though they are typically willing to work with those with bad credit, reputable lenders will always check your credit score so they understand your behaviour and borrowing track record. 

For lenders that are willing to proceed without a credit check, be aware that they might ask for collateral. This collateral could be small personal items of value or even your vehicle. 

It's recommended that you avoid these types of loans, especially if they include outrageous fees or risk you losing your personal possessions. 

Payday Loans

A payday loan is a short-term loan that a borrower is expected to pay back on their next payday. The due date will be determined in advance and is stated in the signed loan agreement. 

Because these loans are typically smaller amounts than the average personal loan (usually $500 and less), your credit or ability to pay back the loan is not usually considered by the lender. Because of the mandatory fees that accompany payday loans, borrowers might unintentionally agree to the equivalent of a 400% APR. 

Pawnshop Loans

Because of the collateral, a pawnshop loan does not require a credit check or an application. In this borrowing scenario, a borrower brings an item of value to a pawnshop and has it evaluated. A pawnbroker will offer a loan up to the amount of the item's value. 

Once you have cash in hand, you'll have a set amount of time to pay back the loan with interest until the item is eligible for a pawnshop sale. Interest rates tend to charge between 5% and 25% a month, and additional holding fees may apply. 

Car Title Loans

A car title loan allows a borrower to release the title of their vehicle as a form of secure collateral until a loan is paid off. A lender will place a lien on a borrower's vehicle title that allows them to repossess the vehicle in the event of a loan default. These loans tend to accrue higher interest rates in lieu of a credit check. 

Because of their predatory nature and questionable terms, title loans are not legal in every state. 

Right Steps to Get A Personal Loan with Bad Credit

As long as you are able to meet the criteria, and are willing to put up with high-interest rates or collateral, there should be a bad credit loan option out there for you. 

To apply for a personal loan with bad credit, there are a few options that might increase your odds of approval. 

  1. Review a copy of your credit report and report any errors 
  2. Add a co-signer to increase the security of your application 
  3. Do what you can to improve your credit score in the short term, like paying down excess credit card balances 
  4. Gather documents that show banking balances, income, and assets

Once you have been approved for a personal loan, remember -- paying off the loan according to your loan agreement will help you get on your way to better credit. Missing payments will further damage your credit score. 

Compare Personal Loan Lenders 

Once you understand how to get a personal loan with bad credit, it's time to compare lenders. With varying interest rates and terms, not every loan is made equal-- you must be absolutely sure that you can afford to pay back the loan that is being issued to you. 

Start putting in the work to improve your credit score. For the most recommended loans for people with bad credit, compare the best online loans in Canada on the Insurdinary site. 

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