You’ll always find yourself in a situation where you need to dip into your emergency fund. Whether you’re fixing your house, maintaining your car or repairing that roof, you’ve got no choice but to take the money out. I guess that’s fine because you have an emergency fund worth eight months to cover all the expenses including your cost of living, right?
Chances are, you don’t have any. Well, you’re not alone. And neither do over 53% of Canadians who are living paycheque to paycheque. It happens to all of us and you might be one of those people who might be considering a bad credit loan as your last resort to get the money you need, fast!
However, if you think applying for a bad credit loan is the solution, hold your horses and make sure you understand the pros and cons including risks, and if you have other options that you can choose from. Just like other loans, bad credit mortgages in Toronto for instance, there are better term offers too. You just need to understand what it means and our guide will walk you through everything you need to know about bad credit loans.
What is bad credit?
If you’re using a credit card or you’ve applied for a loan, then probably you already have a history of using credit. A credit is like a record of your entire credit usage, debts, payments (or no payments) and other data that shows how well (or poorly) you’re using your credit.
All of this information is then collected by the different credit bureaus and compiled into a document called your credit report. A credit report is a detailed document that shows the break down of any debts you’ve failed to make payments (like any previous loans you may have). In Canada, you can request for a free copy of your credit report by mail. The two national credit bureaus are: Equifax Canada and TransUnion Canada. You should check with both bureaus before applying for bad credit loans.
Your credit score is your financial identity for the bankers and private lenders. Basically your credit score is the decision maker on your eligibility on mortgages and how much you’re eligible according to your credit history.
You can check your credit score here.
Once you have your credit score, you can compare it to the table below to know how good (or bad) your credit score is:
FICO Score Ranges with Credit Ratings according to Experian.
|800 – 850
|740 – 799
|670 – 739
|580 – 669
|300 – 579
If you’re score is lower than “Good”, don’t worry! You’ve already taken the first step of learning about your credit score. Improving your credit will take time and commitment, but it can be done.
There are also credit repair companies that can help you in every step of the way. You can learn more about Credit Repair Now here.
What is a bad credit loan?
A bad credit loan is a personal loan offered to individuals with poor, weak or even to non-existent credit. The loans can be about anything. From medical bills, car purchase and even in purchasing a property. There are a lot of institutions that can provide financial assistance like banks, online lenders and credit unions. Some people also choose to have their own Mortgage Broker to provide an assistance in acquiring a loan.
Generally, bad credit loan tends to have higher interest rates and fees, together with less than a desirable term for the borrower/s. Having a low credit score, more often than not, reflects that you’re a high credit risk to lenders and more likely defaulting a loan compared to someone who has a good credit score.
Therefore, borrowers with a good credit score have the tendency to be approved for loans with better interest rates and terms. It really depends on the lender’s cutoff credit scores and criteria for loan approval plus fees. You see how important it is to take care of your credit score? Credit scores are like a measure of your financial health.
Need professional help? At Credit Repair Now, you are guaranteed that you can get the best credit repair and mortgage services in Canada. Our team of professional mortgage brokers can assist you with your bad credit mortgage application. Schedule an appointment with us today!