Bad Credit Loans in British Columbia
Have bad credit and are looking for a loan? Don’t worry, there are still options out there to get you the funds that you need. Having a low credit score does make it more difficult to go through traditional lenders such as banks, however, there are many alternative lenders out there still willing to lend […]
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Have bad credit and are looking for a loan? Don’t worry, there are still options out there to get you the funds that you need. Having a low credit score does make it more difficult to go through traditional lenders such as banks, however, there are many alternative lenders out there still willing to lend you money, some without even doing a credit check. These lenders base their decisions on more than just your credit score. These factors help them determine the risk factor of lending to you and have additional requirements in the lending process to allow more people to be approved for loans. Ultimately, it is in the lenders best interest to lend money because the more money they lend the more they stand to gain off interest.
Our Bad Credit Loan Application Process
What is bad credit?
Bad credit is based on a number of factors such as payment history, your debt-to-income ratio (DTI), how new you are to credit, credit history, the amount of inquiries you have on your file, and any public records such as bankruptcy or collections. The combination of these requirements are what credit bureaus (Equifax and Transunion) use to calculate a credit score. This credit score communicates to lenders the risk of lending, aiding in the decision-making process for loan approvals. The lower the credit score, the riskier it is for the lender to approve a loan. In Canada, British Columbia included, bad credit is considered to be a score that sits below 600.
What credit score do you need to borrow money in British Columbia?
In Canada, the borrower’s approval ranges on a credit score that sits anywhere from 300-900. The general consensus is that a credit score over 659 is considered good and increases the likelihood of approval at traditional lenders such as banks and credit unions. It would be easy to say anything over 659 is considered good credit and anything under 600 is considered bad credit, but it is a little more complex than that. Credit is broken down into sections:
- 760 to 900: Excellent
- 725 to 759: Very good
- 660 to 724: Good
- 600 to 659: Fair
- 300 to 599: Poor
In General, it is hard to give an exact number on what credit score will get you approved for a loan in British Columbia because it is possible to get a loan with almost any credit rating. The credit rating you have helps to determine what kind of loan you will receive, how much money the lender is willing to loan, how accessible it is, and what interest rate will be given. When it comes to borrowers that have a lower credit score, lenders can still approve a loan but it will have a higher interest rate in order to mitigate their risk.
What are the types of bad credit loans in BC and what are their Advantages/ Disadvantages?
In British Columbia, there are multiple types of bad credit loans. There are personal loans, which come in the form of secured and unsecured loans, as well as cash advance loans like payday loans. Each of these loans have their own advantages and disadvantages. Payday loans are fast and require no credit check, secured loans require collateral, and unsecured loans require less risk for the borrower because of the lack of collateral.
Each of these types of loans come with risks as well. Payday loans have astronomical interest rates due to the lack of a credit check. Secured loans come with the risk of losing the collateral if the payments are not made on time, and unsecured bad credit personal loans often also come with high interest rates. However, because an unsecured personal loan is also an installment loan that you can pay off over an extended period, often the lender will offer lower payments, mitigating the borrower’s risk of getting stuck in a loan cycle of constant borrowing. Installment credit also allows for credit building benefits.
What’s the easiest loan to get with bad credit in BC?
Getting a bad credit loan can often be a bit more difficult. Based on the borrower’s high risk credit score lenders often have additional requirements. Secured loans are often the easiest type of personal loan to get because they require collateral. This type of loan is ideal for lenders to give to borrowers who have a bad credit because it requires less risk. By requiring the collateral on assets such as property or vehicles, the lender is assured that even if the loan is defaulted, they will not walk away with nothing. Unfortunately, not everyone has collateral. In that case, an unsecured loan would be required.
Can you get a bad credit loan with no credit check?
Since bad credit is a general assessment of a credit score it is hard to determine how bad a borrower’s credit really is since there are other factors other than just credit involved; especially when it comes to bad credit loans. Sometimes, it is easier and even necessary to go with a no credit check loan. One of the ways to get a loan without a credit check is a Payday loan. Payday loans can be great because you can access the money almost immediately and the repayment schedule is quite short, usually only a few weeks. These types of loan also do come with drawbacks such as interest rates that can go as high as 400%. With interest rates this high, it can become difficult for the borrower to pay off the loan. This can result in obtaining more payday loans to pay off the current payday loan and can become a difficult cycle to break.
Do bad credit loans need a down payment?
Another common question when looking into a bad credit loan is if they require a down payment. In terms of loans a down payment is a lump sum of money that is put towards purchasing an expensive item such as a house or car. Unless you are purchasing a large item a down payment is not required regardless of if you have good credit or bad credit.
Because it is possible to purchase a vehicle with bad credit at a higher interest rate, it is possible to make a higher down payment to mitigate some risk, but this is a specific scenario with collateral and not something you would have to worry about.
Is your credit score affected by a bad credit loan?
One of the biggest questions when looking for a bad credit loan is if and how it affects your credit score. The short answer is it will only if you use a lender that reports to the credit bureau. So, if you use a lender that does not credit check loans, unless you default on that loan and go to collections, that loan will have no effect on your credit. If you are using a lender that provides loans with a credit check or credit building capabilities, such as online lenders that specialize in bad credit loans, then your payments will be reported to the credit bureau. The effect it has on your credit score is based on whether you make your loan payments on time, which determines whether the impact is positive or negative.
If the goal when getting a bad credit loan is to improve your credit, then it is best to go with a lender that reports to the credit bureaus and to make sure all payments are made on time. If it is shown on your credit report that you can make payments on a timely basis, this reflects more positively to future lenders, allowing for some of the negativity on your credit report to be negated. Over time if the positivity is maintained, you can bring your credit score into a positive standing and obtain loans with traditional lenders with lower interest rates.
If the primary goal is to obtain funds for a short period of time, then the no credit check option may be a good option. These types of loans are often best to help you out of a bad situation on a short-term basis.
What companies will give you a loan with bad credit in BC?
In British Columbia, there are many companies that can give you a bad credit loan. Most of these companies are online, such as Spring Financial. Because these companies are based online, they can accommodate more applicants and allow more credit approvals for those with bad credit. These companies often specialize in bad credit loans and are referred to as bad credit lenders. These companies often allow for credit building opportunities. Because there are so many options available regarding bad credit lenders, it is important to not overapply. Too many credit inquiries in a short period of time can reflect negatively on a credit report making it more difficult to access funds.
In some cases, it is still necessary to go with a payday loan due to the lack of credit check required. Even with a bad credit loan there are some stipulations on credit as well as other requirements that need to be met. These requirements vary depending on the lender.
How do you qualify for a bad credit loan in BC?
Once it has been determined that a bad credit loan is the best step for you as a borrower, how do you qualify? That depends on the lender and the type of bad credit loan you decide to go for. First you must decide if you want to build your credit with the loan, how much money you need, and if you want to put up any collateral. Every lender is going to have different qualifications depending on these factors.
For almost all bad credit loans in BC, along with a completed loan application, a few main factors are required to qualify. You must:
- Be a Canadian citizen or permanent resident
- Have a Canadian bank account
- Be at least 19 years of age
- Meet the lender’s minimum income requirements
- Provide required documents to the lender such as government-issued ID and proof of income (eg: pay stubs, direct deposit statements)
Depending on whether you are getting a payday loan or a personal loan will determine if a credit check needs to be done. If a secured loan is required, an assessment of the value of the collateral will be needed.