The Different Types of Personal Loans for Bad Credit

The Different Types of Personal Loans for Bad Credit
April 26, 2019 northstar

A bad credit rating undoubtedly affects borrowing ability and leaves a borrower little chance to obtain a loan from a conventional financial institution. But can you really obtain a loan when you have a low rating? What solutions are available when it comes to personal loans for bad credit?

No credit check loans

Alongside traditional banking institutions, brokers and private lenders grant thousands of loans to Québec residents every day. Rather than make their decision based on a rating and a credit check, which may reflect past management errors, they rely instead on the borrower’s level of current income and their ability to pay in order to grant them a loan. Based on these criteria, they grant:

  • unsecured personal loans
  • secured personal loans
  • personal debt consolidation loans.

The personal micro-loan

For a borrower with a low credit rating, the micro-loan is an option that makes it possible to get a small amount of money—generally limited to $1,000 or $1,500—in record time to pay a bill on time or to avoid a service cut-off or a bounced cheque.

The small personal loan

When a person with a bad credit score needs a slightly larger amount to pay bills, make repairs to their car, or deal with medical expenses, they usually face rejection from the banks. However, despite their bad credit, they can obtain a small unsecured personal loan from brokers or private lenders under certain conditions—in particular, being a Canadian resident, having a stable income and residence for at least six months, and not being bankrupt or subject to wage garnishment.

The medium personal loan

The medium personal loan lets you borrow larger amounts despite a bad credit rating for planned expenses—for example, renovating a house, buying a car, planning a wedding, or taking a vacation.

The secured personal loan

Homeowners who want to borrow money can use the net value of their apartment or house—in other words, the market value of the property minus the amount of the mortgage balance—to obtain a secured personal loan. As it is backed by a property, this type of financing lets you borrow a larger amount (up to tens of thousands of dollars) as well as a better rate.

The personal debt consolidation loan

The personal debt consolidation loan is a loan granted by a financial institution or a private lender that combines all a person’s unsecured debts into a single loan. In other words, apart from mortgages and car loans, all unpaid bills, lines of credit, balances due on credit cards, and other debts can be integrated into the debt consolidation. This unique loan facilitates management, because it streamlines the debts into a single payment, but above all, it lets you save a great deal of money, because it has a lower interest rate. It also gives your monthly budget some room to breathe by spreading the debt out again.

When people with bad credit need money, banks usually turn their backs on them. If they are able to repay a loan, however, they can contact brokers or private lenders to obtain a micro-loan, a personal loan, a secured personal loan, or a debt consolidation loan.