Bad Credit Loans in Ontario
With today’s economy and the current state of the world, it seems like everyone could use some extra cash to help with bills, living expenses, or maybe even a delayed vacation thanks to the pandemic. While a quick Google search will result in many lenders eager to obtain your business, it is important that you […]
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With today’s economy and the current state of the world, it seems like everyone could use some extra cash to help with bills, living expenses, or maybe even a delayed vacation thanks to the pandemic. While a quick Google search will result in many lenders eager to obtain your business, it is important that you as a consumer do a little bit of homework to ensure you understand the fine print so that you get the best deal for your dollar (literally). This can become substantially more difficult if you have bad credit.
Our Bad Credit Loan Application Process
Let's face it – obtaining good credit is hard and maintaining it is even harder. While there are dozens of banks and lenders in Ontario (let alone Canada) in the business of lending, they mostly cater to borrowers with prime credit. The reality is, that most Ontarians (or Canadians for that matter) are not taught how the credit system works, and therefore, fall victim to simple yet avoidable financial mistakes with consequences later in life.
Some of us feel like having bad credit is the end of the financial road for us and may feel like the road to recovery is an unwinnable uphill battle. The truth is, with a few conscious changes, some dedication and patience, credit rebuilding is now easier than ever!
So what is “Bad Credit”?
While credit scores range from 300-900, most lenders will consider anything below 700 to be “subprime” (aka Bad Credit). This means that if your score is not in “prime standing”, you will likely be turned down when applying for loans. A 2021 study shows that the average credit score in Canada was 667. This was despite the fact that this number had actually increased during the pandemic.
Traditional lenders look at your credit report/history as a way to determine the “risk factor” involved with lending money to a potential borrower. The lower the credit score, the higher the risk. It is for this reason that there is a market that is specifically designed to service subprime (bad credit) borrowers.
Financial mistakes that hurt your credit score are but are not limited to:
- Late Payments
- Debts sent to collections
- Overutilizing your trades (ex. having a balance greater than 30% of the limit at the end of your billing cycle on your Credit Card)
- Hard credit checks
- Consumer Proposals
It is important to note that lender's also review other factors to determine eligibility. Other factors include but are not limited to:
- DTI (debt to income ratio)
- Income consistency/ability to repay
- Banking history
- Reasons for borrowing money/Loan Application
- Other outstanding debts/loans/liabilities
Ontarians are diverse in every aspect so it should be no surprise that so are their finances. As such, at Spring Financial, each application requires a manual review to determine the best eligibility.
What are my options if I have Bad Credit?
While the options are more limited for someone with bad credit, there are still lots of opportunities out there to borrow money. As the most populous province, Ontario is saturated with lenders that are happy to work with you. Common types of loans offered are payday loans, secured loans and personal installment loans.
Types of Bad Credit loans
The fastest and most common avenue to borrow is through payday loans. Although they do not require a credit check, they are not encouraged as the entire amount borrowed is generally expected to be paid with your next paycheque. This will likely leave you back in a financial bind come your next pay cycle. By law, they cannot lend you more than 50% of your net income per loan. These are the most expensive consumer loan types in Ontario, which results in the highest APR (Annual Percentage Rate) applied. As per Ontario law, the maximum cost of borrowing is $15.00 for every $100.00 you borrow.
Here is an example from the Ontario government that illustrates the cost of borrowing from a payday loan to a credit card:
|If you borrow $300 for 2 weeks:||Payday Loan (fee)||Credit Card (at 23% interest)|
|1 loan will cost||$45.00||$6.15|
|2 loans will cost||$90.00||$12.29|
|3 loans will cost||$180.00||$24.59|
|4 loans will cost||$270.00||$36.88|
Furthermore, payday loans don’t report to the credit bureau. This means that even if you pay them on time, your credit score will not benefit from this whatsoever and will not assist you in credit building or repairs.
Personal Loans (aka Installment Loans) on the other hand work differently. Every on-time payment to your personal loan will be positively reported to the credit bureau. Personal Loans have lower APRs (Annual Percentage Rates) than payday loans and offer monthly payment options to pay off the loan. This serves better as financial aid for those in need, particularly when a person is in need of an amount greater than 50% of their next paycheque.
Secured loans, however, require some type of collateral to receive the loan. This makes them the easiest type of loan to receive with bad credit. One example of a secured loan is a car loan. Due to the fact there is an asset involved, the lender is able to secure that asset in the event of defaulted payments. This allows the lender to be more lenient when lending.
Advantages and Disadvantages of Bad Credit Loans
As discussed above there are a few types of bad credit loans and each come with their advantages and disadvantages. Payday loans are fast and often result in instant loans. They are a popular option for this with bad credit but they cost more than the average bad credit loan. Personal loans often have a lower interest rate then payday loans but can still be quite high. Secured loans are also high interest if you have bad credit and do require you to give up the asset if you miss too many payments.
Ultimately the advantages of personal and secured loans are that they help boost your credit to avoid these interest rates in the future. This isn’t the same case with payday loans, but they do get you money fast when you need it.
What credit score do you need to borrow money in Ontario?
There are no set requirements on what number a credit score needs to be. Each lender will have different criteria, however, as previously mentioned, various factors are observed when making a lending decision.
How long does it take to rebuild my credit?
While this again will depend on the scenario, the length of time will depend on what is on your credit history and how you act on it. Waiting for 7 years (the average time for most items to fall off your credit report) is a lengthy time to wait. There is no better time like today to formulate a plan to begin the credit rebuilding process.
What’s the catch with bad credit?
The reality is that having bad credit will unfortunately result in less approvals or likely a loan with higher interest rates. There, we said it – that’s the catch! This is where the conscious changes, dedication and patience previously mentioned come into play. Should you be approved for a “bad credit loan”, you may see a slightly higher interest rate than you’d like, or a smaller approval amount than you had hoped for. Keep in mind that this may just be an introductory loan and should you continue to pay your personal loan and other liabilities on time, you should be able to start seeing the positive reporting to your credit score.
What information will I need to get a bad credit loan in Ontario?
On a typical application, we will require the following:
- Government issued picture ID (Driver’s License, Passport, Status Card etc.)
- Current Credit Report
- Current Banking history (last 90 days) that shows your source(s) of income
Applications do vary from individual to individual so you may be required to provide other items such as pay stubs, utility bills etc. Don’t worry though, we are set up with the latest technology to ensure that you can provide these documents (if needed) to us from the comfort of your own home. Most of our applications can be done over the phone or online without ever having to go to the bank or elsewhere to collect information. We know that time is money and money is what we want you to have!
What will my interest rate be?
This will be determined once the final underwriting process is complete. Our partners at EZ Financial (the lenders) will determine your interest rate once/if all the information required is reviewed and approved.
Our loans go up to $15,000 with APR’s from 18.99% – 46.96% and terms from 9-60 months. For example:
If $1,000.00 is borrowed for 12 months at 46.96% APR, bi-weekly payments will be $48.51. The total repayment with interest will be $1,261.17 and total cost of the loan will be $261.17.
Rest assured, we offer some of the most competitive rates in the market and keep your best interest in mind at all times.
Will you require a down payment?
No. There is no collateral or down payment needed if you are approved for our personal or foundation loan.
Will the credit check affect my credit score?
A hard credit check such as the one we conduct will impact your credit rating but only by about 5-15 points. Our loan advisors will work with you to action a plan to recuperate those points lost and more.
How will I receive the funds?
If approved, the funds will automatically post in your bank account via EFT (Electronic Funds Transfer). Depending on your bank, the funds will appear in 1-3 business days the same way a payroll deposit does.
Likewise, the payments are automatically aligned with your paycheque and will be taken via pre-authorized debit.
Why should you choose Spring Financial?
At Spring Financial we are committed to assisting our customer’s. This assistance is not limited to just financial aid. We pride ourselves in being a lender that cares about teaching our customers about the importance of credit, how to rebuild it and how to maintain it. This is why with every approved personal loan, we include our Credit Monitoring and Loan Protection Plan.
Many people are unaware of how to obtain their free credit scores themselves through TransUnion or Equifax. It is for this reason that we include our credit monitoring service in your approved personal loan so that you may actively watch the progress of your on-time payments and more. We do all the work for you so that you can focus on repaying the loan off in a timely manner.
We also set you up with our Loan Protection Plan that you may require in the event of unforeseen circumstances that may cause you to miss some payments. If approved, our knowledgeable Loan Advisors will be happy to go over the details of that with you.
We also offer our Foundation Program which is solely designed to help you rebuild your credit! This modern concept takes a unique approach (think of a reverse mortgage or home equity loan) on adding another positive tradeline to your credit report that if paid timely, will also positively report to the credit bureau.
Lastly, we take pride in the service we offer to our customers. We want you to be another one of our success stories and hope to be with you every step of the way. Our customer care agents along with our loan advisors are well trained on how credit reporting and credit rebuilding works and will be happy to share their wealth of knowledge with you.
We proudly have 4.6 out of 5 Google review score with over +12K reviews and 4.8 out of 5 TrustPilot score with over 8K reviews.
But don’t just take our word for it, see the testimonials of some of our customers in the link below: https://www.springfinancial.ca/reviews/
How do I get started?
We thought you’d never ask! Click the link below to complete our 3 minute application on our Personal Loans.
Alternatively, you may contact one of our Loan Advisors by phone at 1-888-781-8439.
So, what are you waiting for? It’s time you start enjoying the perks of fair priced financial products!