Personal loans. They can be a daunting thing for some people. For others that are in more dire straits, it could be seen as their last lifeline. Right after the height of the pandemic, about 26% of all Canadians planned on getting a personal loan. However, personal loans for people with bad credit can be harder to come by. But people with bad credit still need access to some type of loan.
So, what loans for bad credit can you get? What are the best options out there for you?
These are some of our most recommended options.
One of the best options for people with bad credit is to take a secured loan. A secured loan poses a lot less risk to a lender than an unsecured loan.
The reason for this is that with secured loans, the borrower has to put up some type of collateral to back up that loan. This means that if the borrower fails to pay the loan back after a certain amount of time, the lender has the right to keep the collateral.
Let’s say that a borrower needs $25,000 as a loan from the lender. They may not have the credit history or the income to qualify for a typical unsecured loan.
So, what do they do here? Well, they can put up the car they own that has that kind of value as collateral.
While it does make it much more likely for someone to be approved for a higher loan, it does pose some risk to the borrower.
The main thing to be aware of is that the borrower typically has to put up a valuable item as collateral. In some cases, it could make their life a lot more difficult if they suddenly lose that item.
So, if a borrower takes out a secured loan and puts up their car as collateral without being prepared to lose it, they better make sure that they have the means to pay that loan off. If they can pay the loan back, this can be a good way of lowering interest rates on loans and qualifying for a bigger loan.
Another way for Canadians with bad credit can get a personal loan is by finding a co-signor. Ideally, this person has a very good credit history and they have a close relationship with you.
However, this is easier said than done. The reason is that when someone co-signs a loan with you, they are responsible for any outstanding debt if you cannot pay the loan off yourself. Depending on what you are asking for, it can make a co-signor financially vulnerable.
There are a lot of financial and tax implications when it comes to co-signing a loan. Depending on the agreement that you have, a co-signor may have to start contributing to the loan immediately. Even if they go the other route of only stepping in if you fail, that can shake up their entire world financially.
So, you want to make sure of two things before you go this route. First, you want to make sure that you can pay this loan back. Second, you better have a very close relationship with the person that you ask to co-sign a loan with you because it can be a big ask for some people.
For those with very bad credit in desperate times, payday loans are something you can qualify for. How this works is that typically, you can get small amounts of money, such as a few hundred dollars, before your next paycheck comes in.
Once that happens, you are on the hook to pay that money back on your next paycheck. However, the catch with this type of loan is that it has a very high interest rate.
So, you could find yourself in a situation where you have temporary money at first. Then, on the next paycheck, the borrower could take out a good chunk of it after interest.
In certain situations, it could leave you worse off than when you started. That could force you to take out another loan that can put you deeper in the hole.
Be careful when getting involved in personal loans such as this and do your research on interest rates.
Credit Card Cash Advance
Finally, if you are desperate for some cash in your hand, one option you do have is to take a cash advance. This can be done by putting your credit card into an ATM and getting out whatever amount of cash that you need.
The biggest pro of this type of personal loan is that it takes the shortest amount of time to get your money. All you have to do is walk to an ATM.
However, the big con is the interest rate. While it is not as bad as a payday loan, it is typically higher than the regular interest rate on a credit card. On top of this, the interest starts the moment you take the money out.
Learn More About Personal Loans for People With Bad Credit
These are some personal loans for people with bad credit. If you have bad credit, do not give hope when it comes to getting money when you need it.
You have options such as finding a co-signor that trusts you or putting up some collateral to qualify for a better loan. However, make sure you avoid personal loans with higher interest rates such as payday loans or credit card cash advances.
Do you need a personal loan? Apply here to see if you qualify.