People with bad credit often lose hope when it comes to borrowing money, especially today in Canada, where banks are less willing to lend. Many people have lost their jobs which then results in monthly debt payments. In turn causing bad credit ratings. Even those who still possess a stable job, sometimes aren’t able to maintain their payments due to the increased need to tighten up the budget. As a result, it affects their credit rating score poorly. But don’t despair or lose hope, there is still a chance to become approved by a lender.
Some people decide to start a small business instead of acquiring a steady job, and the average amount needed to start a small to medium business is about $5000. The question is: can you take a $5000 loan out even if you have bad credit history?
There are a lot of reasons that you might need $5,000 fast. Maybe you have a one-time emergency, and you have no funds to pay for it, but if you don’t, things will only get worse. Or perhaps you are looking in a positive direction, toward opportunity, but you don’t have the venture capital you need to get your plan off the ground. Whether you are trying to pay for an emergency or fund a startup company, it can be challenging to get a loan with bad credit. You will have a very hard time finding an unsecured loan, and you may not have enough collateral to qualify for a secured loan at most major banks. But there are still ways you can get a $5,000 loan in Canada even with bad credit if you know where to look.
In this article, we’ll introduce you to a couple of different options for small bad credit loans in Canada. The first is applicable to business loan scenarios, whereas the second is geared toward personal loans for use in emergencies. Always look for a lender that caters not just to your financial needs, but to the purpose of the loan you require. That way you will get the product which will be most compatible with your needs.
Two Best Options for Consumer with Bad Credit
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You still want to fix your credit score but you have less than $10,000 in debt . You can apply online here for this credit rebuilding program.
Comparison of other alternatives:
Loans Secured on Pay Cheques (Bad Credit Loans) or Payday Loans
- Website: https://www.bad-credit-loans
- Offering bad credit loans which are secured on payday cheques. You will need a steady job for these loans and payments can be reported to the credit bureau.
- Loan amount of $500, $2300, $3200 and $5500
- APR’s are generally high up to 36.00%
- For bad credit loan amounts of $5500, monthly payments will be very high
Canada Drives (Auto Loans)
- Application URL: https://www.bad-credit-loans
- They are really not a lender but a broker
- They mainly offer Bad credit Auto Loans
- Loan amount starts at $5000
- APR of up to 31.9%
- Payment term from one day up to 96 months
- Offers secured loans only
- Needs a driver’s license to apply, a stable job and must be at least 18 years old
These are two of the most reputable online bad credit lenders that will allow you to loan greater amounts. Make sure you try to look for other lenders in your town or community, there will be one or two there for sure if the above list doesn’t satisfy your needs.
There is another thing to consider when applying for bad credit loan totaling $5000 and that is the type of loan, will it be secured or unsecured? The two lenders above only offers secured loans. That means that you will need to have a collateral to be able to have a successful loan application. And with that enormous amount, your collateral needs to be precious too, like a car, a house or a precious jewelry. Unsecured loans on the other hand don’t require as much, but with that kind of bad credit loan amount, $5000, it is nearly impossible to find an individual who would risk such amount of money to lend to a person without any guarantee that he’ll be able to reclaim it.
Community Investment Funds
If you are specifically looking for a loan to help you start up a small business, you might be able to get help from a Community Investment Fund. These are non-profit organizations which help people who can’t get loans through traditional banks or credit unions, either because of credit ratings or lack of collateral. These groups can help people with bad credit as well as no credit.
Note that you will only be able to qualify for one of these loans if you do it at a local level, and if your business is seen as locally viable. Most of these organizations are backed by funding from local businesses and service providers—not the federal government. Examples include the CDBC First-Time Entrepreneur Loan in Atlantic Canada, and the Quebec City Community Loan Fund.
Check your local area to see if there are any similar investment funds if you want the $5,000 loan for a small business. Many of these organizations will fund that much or more, if you need it (some may even loan as much as $150,000 to eligible recipients). You will have to have a business proposal with detailed plans for the intended use of the money you are going to be borrowing. A few organizations are a bit looser about their loan terms and what you can use the money for. The St. John Community Loan Fund for example will provide up to $5,000 for small business, but adds that loans can be used for “almost anything, as long as it is legal.”
Personal Loans and Payday Loans
Another option is a payday loan company, which may also be called a cash advance lender. These companies specialize in offering small, short-term personal loans to customers who are in need of funds for emergencies. The loan terms and lengths may vary. In general, expect a very high interest rate, and a short loan term. Payday loans take their name from the fact that you are generally required to repay them by your next payday—within two to four weeks. Some personal loans may be available for longer time periods (several months for example). It is in your own best interest to choose loans with the shortest possible terms you can manage, so that you do not lose a lot of money on interest.
Be very careful when you are shopping for payday loans. There are many reputable payday loan companies out there, but there are also plenty of scammers as well who will attempt to defraud vulnerable customers. Do thorough research on any payday loan company you are thinking of borrowing from, and make sure you read the terms of the loan you are offered very carefully. The company will probably take the repayment plus the interest owed on the due date directly from your bank account. So if the money isn’t there, you will overdraw, and owe your bank fees. And that means even more money to pay back, and they could compound over time if you don’t take care of your debt quick.
Personal loans like these which are very short term in nature are intended for emergency use only. You should not take them out to pay for non-essential things, and you should never make a regular habit of using them, otherwise you can fall into a well of debt that gets deeper and deeper. You also would not want to go this route for a small business loan, since the interest rate and the terms are far too restrictive. But if you have a one-time medical bill, car repair, or other emergency to pay for, they can be great—as long as you can pay them back on time.
Applying for payday loans is easy, once you find a company you can trust. You can often do it online, and receive the money immediately once your application is approved (which can happen within a couple of days or even on the same day). This can be very helpful if you are pressed for time or money for transportation.
However you decide to get a personal or business loan in Canada, always do your research and your math. Ask yourself whether you will be able to pay back the loan on time with interest. Taking out a loan with a high interest rate is always going to end up costing you money, but any trustworthy lender will provide you with full details and an exact statement of what you will owe if you pay on time, as well as the consequences should you be late on payments. Make smart decisions about small bad credit loans in Canada, and only take out what you can afford to pay back.