Having bad credit doesn’t mean you can’t get a loan in Canada, but it does mean you need to be more careful about where you borrow and what you agree to. Lenders that cater to lower credit scores charge higher rates to compensate for the additional risk, and some cross the line into predatory territory. Understanding your options — and the traps to avoid — can save you thousands of dollars and prevent a bad situation from getting worse.
What Counts as Bad Credit in Canada?
Credit scores in Canada range from 300 to 900. Here’s how lenders generally view the spectrum:
| Score Range | Rating | Lending Impact |
|---|---|---|
| 760–900 | Excellent | Best rates and terms from any lender |
| 700–759 | Good | Approved by most lenders at competitive rates |
| 660–699 | Fair | Approved by most lenders, slightly higher rates |
| 600–659 | Below average | Limited to B-lenders, credit unions, some banks |
| 560–599 | Poor | Alternative lenders, secured loans, co-signer needed |
| Below 560 | Very poor | Very limited options, highest rates, secured or co-signer only |
Most people referring to “bad credit” fall below the 600 mark, though borrowers in the 600–659 range also find their options significantly limited compared to those with good or excellent credit.
Lending Options by Credit Score Tier
| Credit Score | Available Lenders | Typical Rates | Loan Amounts |
|---|---|---|---|
| 660–679 | Most banks, credit unions, online lenders | 8–15% | $5,000–$50,000 |
| 600–659 | B-lenders, credit unions, select banks | 12–25% | $2,000–$35,000 |
| 560–599 | Alternative lenders (Fairstone, easyfinancial) | 20–35% | $1,000–$25,000 |
| Below 560 | Secured loans, co-signer loans, last-resort lenders | 25–35% | $500–$15,000 |
Where to Get a Bad Credit Loan in Canada
Credit Unions
Credit unions are member-owned financial institutions that often take a more personal approach to lending. They may consider your overall relationship, employment stability, and explanation for poor credit rather than just your score. Rates are generally lower than alternative lenders, and they’re more likely to work with you on repayment terms if you run into trouble.
Online and Alternative Lenders
These lenders specifically serve borrowers with lower credit scores:
| Lender | Min Credit Score | Rate Range (APR) | Loan Amount | Key Details |
|---|---|---|---|---|
| Fairstone | ~550 | 19.99–34.99% | $500–$25,000 | Secured and unsecured options |
| easyfinancial | ~500 | 19.99–34.99% | $500–$15,000 | In-person and online, quick approvals |
| Mogo | ~600 | 5.9–46.96%* | Up to $35,000 | Online-only, rate depends on product |
| Spring Financial | ~550 | 9.99–34.99% | $500–$35,000 | Credit-building focus, no branch visits |
*Rates vary by product and province. Always confirm the APR before signing.
Secured Personal Loans
If you own assets — a vehicle, savings, or investments — you can use them as collateral for a secured loan. Because the lender’s risk is reduced, you’ll typically qualify more easily and get a lower rate than an unsecured bad credit loan. The risk is that you lose the asset if you can’t repay.
Co-Signer Loans
A co-signer with good credit (ideally 700+) can help you access better loan products and lower interest rates. The co-signer is equally responsible for the debt, so missed payments will damage both your credit and theirs. Many banks and credit unions offer co-signer personal loans.
What to Watch Out For
Bad credit lending is where predatory practices are most common in Canada. Know these risks before you sign anything.
High Interest Rates
As of January 2025, the Criminal Code of Canada caps the cost of borrowing for high-cost credit products at 35% APR, down from the previous 60% effective annual rate. This is still extremely expensive. On a $10,000 loan at 35% APR over 3 years, you’d pay roughly $6,400 in interest alone — more than half the original loan amount.
Hidden Fees and Mandatory Insurance
Some lenders add on credit insurance, administration fees, or processing charges that dramatically increase the actual cost. Always ask for the total cost of borrowing in writing, including all fees and insurance. If insurance is presented as mandatory, question it — in most cases, loan insurance is optional.
Rollover Traps
Some short-term lenders make it easy to refinance or “roll over” your loan, adding new fees and interest each time. What started as a $2,000 loan can balloon significantly. Avoid refinancing unless it genuinely reduces your total cost of borrowing.
Payday Loan Risks
Payday loans are regulated provincially in Canada, and effective annual interest rates can exceed 300–500%. They are designed to be short-term but frequently trap borrowers in repeat cycles. If you’re considering a payday loan, explore every other option first — a credit union emergency loan, borrowing from family, or even a credit counselling DMP will almost certainly cost less.
Alternatives to Bad Credit Loans
Before committing to a high-interest loan, consider these options:
Negotiate with your existing creditors. If you need a loan to pay other debts, contact those creditors first. Many will offer hardship programs, reduced rates, or modified payment plans.
Credit counselling and Debt Management Plans. Non-profit credit counselling agencies can negotiate with creditors to reduce your interest rates to 0–5% and set up a structured repayment plan. This is almost always cheaper than a bad credit loan.
Secured credit card to rebuild. If you need to rebuild credit rather than borrow money, a secured credit card (where you put down a deposit as your credit limit) lets you demonstrate responsible use without high-interest debt.
Borrow from family or friends. Not always comfortable, but far cheaper than a 35% APR loan. If you go this route, put the terms in writing to protect the relationship.
How to Improve Your Credit While Repaying
Taking a bad credit loan should be a stepping stone to better credit, not a permanent situation. Here’s how to make the most of it:
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Make every payment on time. Payment history accounts for about 35% of your credit score. Even one missed payment can set you back significantly. Set up automatic payments to avoid forgetting.
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Keep credit utilization below 30%. If you have credit cards, keep balances below 30% of your total available credit. Below 10% is even better.
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Don’t apply for new credit. Each application triggers a hard inquiry. Multiple applications in a short period signal desperation to lenders and further lower your score.
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Check your credit report for errors. Request your free credit report from Equifax and TransUnion. Errors are more common than you’d think — incorrect balances, accounts that aren’t yours, or debts already paid can drag down your score. Dispute any inaccuracies.
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Be patient. Credit rebuilding takes time. With consistent on-time payments, most borrowers see meaningful improvement within 12–24 months.
The Bottom Line
Bad credit loans exist in Canada and can serve a purpose when you genuinely need funds and have no better options. But the high rates charged by alternative lenders mean you should exhaust cheaper alternatives first — credit unions, creditor negotiations, credit counselling, and family loans. If you do take a bad credit loan, make every payment on time and use it as a bridge to rebuilding your credit, not a long-term borrowing strategy.