bad credit loans lrg

Not all bad credit loans are created equal. When you have bruised credit and are looking for a loan, it feels like your options are limited. But rest assured that you do have choices.

In this blog, we’re breaking down what those choices are and how to select the best one for you!

Payday Loans

Payday loans promise you cash quickly regardless of your credit score. Essentially, a payday loan will give you an advance on your paycheque. However, these types of loans are rarely the best solution for people with bad credit. Here’s why:

  • Payday loans have very short repayment cycles – usually between 14-to-62 days. Let’s say you borrow $1,000 and have to repay that within 20 days (plus interest). Will you have the money at that time? Most people don’t — and this is how payday loans can create vicious cycles of always taking out another loan to pay off the previous one and getting deeper and deeper into debt.
  • Payday loans have extremely high interest rates and fees. What a payday lender charges in two-weeks-to-one-month is almost the same as what other lenders charge in a whole year.
  • Payday loans don’t report to the Canadian credit bureaus. So even if you repay your loan on time and in full, it will not help with credit rebuilding.

Some cities, like Toronto, have even begun limiting the number of payday loan operators because their practices can be so predatory and harmful. There are other bad credit loans available that don’t come with nearly the same consequences.

Personal Loans

Some loans sound too good to be true – and that’s often because they are.

“No-strings” lenders typically do have strings — they’re just hidden. They will charge you big money for the money you borrow, if they help you at all.

This doesn’t mean that all personal loan providers are bad – far from it. But you need to know what you are getting into and whether you can trust the provider you are working with. Some too-good-to-be-true lenders can be just as harmful as payday loan operations.

Watch for red flags, such as:

  • Charging upfront fees or sky-high interest rates.
  • Offering instant approval for a loan, especially if that loan is for more than $1,500.
  • No physical location or contact information.
  • Murky contract terms – or no contract at all. You should be able to see exactly what you are signing up for in advance.
  • No reputation or history. If they are a new or fly-by-night operation, they are likely not legitimate.
  • Not reporting to the Canadian credit bureaus. This is a way to rebuild credit and if a lender does not offer this, it’s of much less benefit to you.

Know in advance what type of lender you are working with for your personal loan.

If your credit score is an issue, there is another type of lender to consider…

Equity Loans

Equity lenders rely less on credit scores because they loan based on equity (value) in the assets that you own. For instance, if own a house with more than 50% equity in it, an equity lender may lend using your home as security. Another asset that is used off is a paid-off car that is less than six years old.

If the loan defaults (is not paid according to the contract) the lender may collect your asset as payment.

This is beneficial for people who have trouble getting a loan from traditional lenders — such as those with bad credit, self-employed, pensioners, independent contractors, and more. Equity loans can often have a lower cost of borrowing than a personal loan or credit cards.

Plus, if you have an asset, then you also have some negotiating power.

Again, it’s important to make sure that the lender you are working with has a long-standing reputation and is transparent about their processes and contracts.

Prudent Financial Services has been an equity lender in Toronto and the GTA for more than 35 years. We offer financial help to people with good credit, bad credit, and everything in between. Contact us today to see if you qualify. Call 1-888-852-7647 or visit

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