How to Find a Loan Provider When Your Credit Score is Less Than Perfect


Not everyone in Canada has a “perfect” credit score. Sometimes, try as hard as you might, you may have less than the ideal credit score. In some instance, you could even have bad or poor credit. However, you might still need to borrow money or take out a personal loan.

We’ll tell you what you should look for in a lender that specializes in lending to borrowers with poor credit

Credit – The lifeblood of many

Even though you may hold a steady job, with an assured paycheck, there may situations where you are financially “taken short”. And even though you may have put away something in your rainy-day fund, you might still end up looking a loan. It may be for an emergency medical situation, home renovations or even for a child’s education.

Affordable credit is the lifeline for many, but here’s the challenge that more and more Canadian’s increasingly face: Unless you have a perfect credit score, “mainstream” lenders – like the Big Five banks – might hesitate to offer you a personal loan. And even if you do end up being offered a loan from one of these mainstream financial institutions, chances are that the terms will be stringent – almost unaffordable.

Just because “Living life” may get in the way of you having a pitch-perfect credit score, doesn’t mean you have to (or can!) stop living life altogether!  So, what are these individuals to do?

Alternate sources of personal loans

The good news: There are alternate sources of lending that you can tap into in order to meet your financial needs. Even though “mainstream” lenders like to lend to people with 750+ credit scores, you still CAN get a personal loan if your score is significantly lower.

However, it will NOT be with a Tier I lender. There are a number of alternate lenders out there that will be more than happy to lend you the money you want:

  • Alternate lenders specialize in extending credit facilities to individuals with bad or no credit history
  • They are usually a last-ditch lender to whom Canadian’s turn to when Tier 1 lenders have declined their loan/mortgage applications
  • They provide an invaluable life-line to borrowers who need a second chance
  • Best of all, they don’t hold your credit history against you when making the decision to lend you money

So, what should you look for when finding and working with an alternate lender – someone who is open to lending to people with bad or no credit? Well, like any important decision in life, you need to do your due diligence before you approach an alternate lender. And here are some points for consideration of what you should look for:

  • Simplicity of process: Even at the best of times, getting a loan can be cumbersome. Some alternate lenders make their borrowing process so difficult, that it frustrates and discourages borrowers. Look for someone who has a simple, straightforward application process. Ideally, look for a lender where you can apply online, and who doesn’t require onerous amounts of paperwork or collateral.


  • Expeditious approval: Sometimes, your financial emergencies are exactly that: They are urgent situations that need prompt financial assistance. The best alternate source lenders are those who approve loan applications quickly. If your lender says that they will review your application in 3-4 weeks and get back to you, then that’s probably not the lender you should be working with!


Ideally, you want that online process to be instant – like that provided by online sites such as JustCompare – without the need to do an in-person visit to fill out forms and submit applications face-to-face.


  • Flexible installment and payment terms: Borrowers usually seek alternate financial support when they have exhausted all other options. A good lender of bad credit loans is therefore someone that understands that situation. He/she works with the borrower to come up with a flexible installment repayment plan based around the borrower’s financial situation.


  • Transparency and Convenience: Rather than scouring the internet for an alternate loan provider, it’s advisable for you to work through aggregators, like Why? Two very important reasons:


  1. Convenience: By taking away all the hassles of finding and connecting with the right lender, aggregators offer clients (like you!) the convenience of a one-stop solution. They are plugged into a vast network of Canada-wide lenders who compete for your business. What does that do for you? Better service and lower rates!
  2. Transparency: Since aggregators are themselves industry experts, they are able to ensure lenders are open and fair with you, the borrower. This level of transparency means you get the peace of mind knowing that knowledgeable professionals have your back, and that the lender truly is offering you the best available loan package available!


  • Application success rate: Most bad credit lenders publish their application approval success rates. Look for someone that has a high approval rate for their borrowing applications. If you work with someone whose approval ratings are in the high 80’s or 90’s, chances are that your application will be approved without much delay!

Of course, there are other factors that might weigh into your decision. For instance, you may prefer a lender that offers great customer service, over another with whom you haven’t had a pleasant experience. Additionally, someone with a less than stellar reputation – like one who is constantly making the headlines with court cases – should be avoided.

And always review a sample of the contract you are about to sign. For instance, be mindful about when and how a “power-of-sale” clause may be triggered. If your lender doesn’t offer flexibility in triggering such a clause, then you may want to look for other options.

However, if a bad credit lender has all of the qualities discussed earlier, and if you approach them in good faith, it is highly likely that you’ll get the financial assistance you are looking for – despite bad or poor credit.

“Good faith” = Success

As Canadian governments at various levels, Federal and Provincial, tighten up the rules for mortgages and personal borrowing, it is becoming harder for borrowers on the margins to access much-needed credit. Alternate lenders are therefore filling that void. But because they step up and take the risk that Tier 1 lenders aren’t willing to take, they charge higher premium rates on their loans. That’s something that borrowers need to be aware of.

So, does that mean that alternate lenders will lend to anyone that approaches them? Hardly! It’s true that they don’t consider a prospective borrowers credit history or credit score. However, they do consider integrity and good faith when making a lending call – which sometimes could happen in less than an hour.

So, what constitutes “good faith” on your part, to qualify for a bad credit loan? Well, alternate lenders expect you to be truthful on your application. If you work at a minimum wage job – say so! If you don’t have any savings – tell them that up front. Don’t lie!

Additionally, your chances of being approved for a bad credit loan will dramatically increase if you provide timely and complete responses to any follow-up questions your lender might ask. Be ready to provide them with Bank Statements, Tax Returns and Pay Stubs – if they request them.

Even though you may think you are “safe” with the mortgage you currently have with one of the Big Five lenders, that may not necessarily be the case. When the time comes to renew your mortgage, your existing lender may not automatically renew your mortgage. Alternately, you might fail the new mortgage stress test, causing your lender to decline your mortgage application.

If that happens, you should know that’s not the end of the world. As long as you do your diligence first, you could seek the financing you need from an alternate lender that’s right for you.

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Nilay Lad

Nilay Lad

Co-founder, Advisor & Guest Blogger

Nilay holds 14+ years of experience in developing and delivering strategies to grow and digitise banks through proposition development and improving customer experience.

This information is just our view and should be not be considered advice of any sorts.
From our experience and other professionals we partner and engage with, we work to find useful tips and information that would be important to share.
If you are someone that is looking for professional advice tailored to your circumstance, please contact a bank, financial advisor, or mortgage broker.