You can get a loan with bad credit in Canada, but you will usually pay more for it. Lenders that work with damaged credit charge higher rates because they take on more risk, and they may offer smaller amounts or shorter terms. Bad credit does not close every door, though. The key is to understand which products are designed for your situation, what they cost, and how to avoid the ones that make a hard situation worse.
What Counts as Bad Credit
There is no single threshold, because each lender sets its own. A file with missed payments, collections, a consumer proposal, or a past bankruptcy is weaker than a file with a few late payments. Lenders also weigh your income and debt load, so a lower score with stable income can still be workable. Check your report from both Equifax and TransUnion, because they can differ.
Options Worth Considering
- Secured loans. Backed by an asset such as a car or a savings account, which lowers the lender risk and the rate.
- Credit union loans. Credit unions are locally focused and sometimes more flexible than banks, especially for members.
- Co-signed or joint loans. A co-signer with strong credit can improve your odds and your rate.
- Small instalment loans. Smaller amounts repaid over months, rather than a single lump sum.
- Credit-builder products. Designed to establish a repayment record rather than to fund a purchase.
Options to Treat With Caution
Some products marketed to bad-credit borrowers are far more expensive than they first appear. Payday loans are the clearest example. The Financial Consumer Agency of Canada compared the cost of borrowing $300 for 14 days: a payday loan cost about $42 to $63, while a credit card cash advance cost about $4 to $8 and a line of credit about $1.15 to $5.81. When your credit is weak, the cheapest options may be out of reach, but the most expensive ones are not a good substitute.
Be wary of any lender that guarantees approval before seeing your information, asks for an upfront fee before lending, or operates without a licence. No legitimate lender can promise approval, because every application depends on credit assessment.
| Option | Relative cost | Built for bad credit? |
|---|---|---|
| Secured loan | Lower | Often yes |
| Co-signed loan | Lower | Often yes |
| Unsecured subprime loan | Higher | Yes |
| Payday loan | Highest | Yes, but costly |
How to Improve Your Odds
- Fix errors on your credit report before you apply.
- Pay down revolving balances to lower your utilization.
- Bring any overdue account up to date.
- Apply with a co-signer if you can.
- Ask about pre-qualification so you can compare without a hard inquiry.
Rebuilding After You Borrow
A loan repaid on time can help repair a damaged file, but only if the payments are affordable. Missing a payment on a loan meant to rebuild credit does the opposite. Borrow the smallest amount that solves the problem, set up automatic payments, and keep the account in good standing until it is paid off. If your debt is already unmanageable, a credit counsellor or a licensed insolvency trustee can lay out options that a new loan cannot fix.
What It Will Cost
Expect to pay more than a borrower with strong credit, and expect a smaller amount. A subprime lender prices for the risk it takes, so the rate reflects the chance of default across its whole portfolio, not just your file. That is why two borrowers with similar scores can be offered different rates, depending on income, stability, and the lender own criteria. Compare the APR and the total cost across at least three offers. A higher rate on a small, short loan may cost less in total than a lower rate on a large, long one. Focus on the total dollars you will repay.
Sources and further reading
- Financial Consumer Agency of Canada, for guidance on credit reports, borrowing, and debt management.
- Financial Consumer Agency of Canada: Payday loans, for the cost comparison cited above.
This is general information, not financial advice. Instalment.ca is a loan matching and comparison service, not a lender and not a financial advisor. All loan terms, rates, and fees are set by individual licensed lenders and are subject to credit approval.