Bad credit narrows where you can borrow and raises what it costs, but it doesn’t rule out a loan. Lenders that serve lower credit scores charge more for the extra risk, up to a legal ceiling: no lender in Canada may charge more than 35% a year, fees included. This page explains what counts as bad credit, the lenders and rates available at each score, how the criminal interest rate cap works, the traps that make high-cost loans worse, and the alternatives to borrowing. It is one of our personal loans and lines of credit guides.
What counts as bad credit in Canada
Credit scores in Canada run from 300 to 900. Lenders draw their own lines, but they generally see the range like this:
| Score range | Rating | What lenders offer |
|---|---|---|
| 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, at somewhat higher rates |
| 600-659 | Below average | Some banks, credit unions and alternative lenders |
| 560-599 | Poor | Alternative lenders, secured loans, or a co-signer |
| Below 560 | Very poor | Few options, the highest rates, usually secured or co-signed |
“Bad credit” usually means a score below about 600, though borrowers between 600 and 659 also find their choices noticeably narrower than those with good credit.
Loans for bad credit: options by score
| Credit score | Lenders | Typical rates | Loan amounts |
|---|---|---|---|
| 660-679 | Most banks, credit unions, online lenders | 8-15% | $5,000-$50,000 |
| 600-659 | Alternative lenders, credit unions, some banks | 12-25% | $2,000-$35,000 |
| 560-599 | Alternative lenders such as Fairstone and easyfinancial | 20-35% | $1,000-$25,000 |
| Below 560 | Secured loans, co-signed loans, last-resort lenders | 25-35% | $500-$15,000 |
Credit unions are member-owned and often look at your whole situation (your employment, your relationship with them and the reason your credit suffered) rather than the score alone. Their rates are generally below those of alternative lenders.
Online and alternative lenders specialize in lower scores:
| Lender | Approximate minimum score | Rate range (APR) | Loan amount | Notes |
|---|---|---|---|---|
| Fairstone | About 550 | 19.99-34.99% | $500-$25,000 | Secured and unsecured options |
| easyfinancial | About 500 | 19.99-34.99% | $500-$15,000 | In person and online |
| Spring Financial | About 550 | 9.99-34.99% | $500-$35,000 | Online, with credit-building products |
Rates vary by product and province, so the APR in the agreement is the number to compare.
Secured loans. Pledging a vehicle, savings or a GIC lowers the lender’s risk, which makes approval easier and the rate lower, at the cost of losing the asset if you can’t repay. Our guide to secured loans explains how they work.
A co-signer. A co-signer with good credit can open up better rates, but they become responsible for the whole debt, and missed payments damage both credit files. Co-signing a loan sets out what they would be taking on. For a car you already own, car title loans explains borrowing against the vehicle.
The 35% criminal interest rate cap
The Criminal Code makes it an offence to enter into, offer or advertise a loan at a criminal rate, or to receive interest at one. It defines the criminal rate as an annual percentage rate of interest, calculated by generally accepted actuarial methods, that exceeds 35% on the credit advanced. “Interest” in the Code is broad: the Financial Consumer Agency of Canada (FCAC) puts it plainly, lenders may not charge more than 35% interest annually, and that includes all fees, costs and interest you pay to get the loan. An administration fee, a required insurance charge or a “membership” fee all count toward the 35%.
Three points follow from that:
- The cap is on the whole cost. A loan advertised at 29.99% with a large set-up fee can exceed 35% once the fee is counted. Comparing the APR in the written disclosure, not the headline rate, shows the true cost.
- Monthly and flat-fee quotes still convert to an annual rate. A lender quoting 5% a month is charging well over 35% a year.
- Payday loans are the exception. Licensed payday lenders in provinces that regulate payday lending may instead charge up to $14 per $100 borrowed, which FCAC equates to about 365% a year on a two-week loan. Our guide to payday loans and their alternatives covers those rules.
Provinces can add their own rules below the federal cap. Alberta, for example, treats a fixed-term loan or lease with an APR of 32% or more, counting the interest and all mandatory fees, as high-cost credit, and lenders that offer it need a high-cost credit business licence.
Even at the cap, high-cost borrowing is expensive:
A $10,000 loan at 35% a year, repaid monthly over 36 months, has a payment of $452.36 and costs $6,285 in interest, more than half the amount borrowed.
What to watch out for
Fees and add-on insurance. Some lenders add credit insurance, administration fees or processing charges that raise the real cost. FCAC notes that you don’t have to take loan insurance with a personal loan; if it is presented as mandatory, ask for the loan without it and for the total cost of borrowing in writing.
Rollovers and refinancing. Some lenders make it easy to refinance or “top up” a loan before it is paid off, adding new fees and restarting the term. Refinancing helps only if it lowers the total cost.
Upfront fees and guaranteed approval. A lender that promises approval before checking anything, or asks for a fee before releasing the money, fits the pattern of a loan scam. The red flags in same-day personal loans describe these in more detail.
Payday loans. Short-term payday loans cost far more than an instalment loan at the cap and frequently lead to repeat borrowing.
Alternatives to a bad credit loan
- Talk to your existing creditors. If the loan would pay other debts, those creditors may offer a hardship program, a lower rate or a payment plan.
- Credit counselling. Non-profit credit counselling agencies can set up a debt management plan, often with reduced interest, and one monthly payment.
- A secured credit card to rebuild. If the aim is better credit rather than cash, a secured credit card backed by your own deposit builds a payment history without high-interest debt.
- Family or friends. Cheaper than a high-cost loan; writing down the terms protects both sides.
- Consolidating at a lower rate. If your score supports a better rate than your current debts, debt consolidation explains the options by credit tier.
Improving your credit while you repay
A high-cost loan repaid on time can be a step toward cheaper credit:
- On-time payments matter most. Payment history is the largest factor in a credit score, and one missed payment can set you back. Automatic payments help.
- Keep card balances low. A low credit utilization ratio, the share of your available credit you use, tends to score better.
- Limit new applications. Each formal application adds a hard inquiry; soft-check estimates, described in personal loan pre-approval, don’t.
- Check your credit reports for errors from both Equifax and TransUnion; incorrect balances, accounts that aren’t yours or paid debts shown as owing can be disputed.
- Give it time. With consistent on-time payments, most borrowers see meaningful improvement within a year or two; how to improve your credit score covers the steps in detail.
Once your score improves, personal loan lenders compared shows the mainstream options that open up.
Sources
The figures and rules on this page come from these sources, last checked against them on September 25, 2026. How we check facts.
- Financial Consumer Agency of Canada: Payday loans