Going In Depth: Bad Credit Personal Loans for Canada

Going In Depth: Bad Credit Personal Loans for Canada
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Payday loans are considered legal in Canada. There are legislations enacted by all nine provinces that lenders and borrowers need to follow to the letter. This is great news for Canadians who are short of cash in between paydays. There are also those who opt to apply for a loan through traditional lending institutions such as banks and credit unions but are unable to do so due to poor credit rating.

The good news is that aside from being legal, payday loans in majority of the provinces in Canada offer bad credit personal loans. They are payday loans that specifically cater to the needs of individuals with not-so-perfect credit rating. Banks and credit unions in Canada are less than willing to approve loan to all applicants that request for personal loans. Although not as bad as the economic meltdown of neighboring US, there are people in Canada who were laid off recently. This in turn negatively affected their household income and has resulted in cash shortage.

People with bad credit get buried in more financial problems as seeking financial relief from banks and other lending institutions is slim to none. Luckily there are payday loan lending companies that are starting to offer payday loans to people with bad credit. There are lenders that approve up to $2500 loan even if you have bad credit. Of course, the loan limit will differ from one company to another. In addition, legislations may differ in between provinces. Borrowers are then advised to check out the interest rates before requesting for a payday loan.

Here is a list of the interest rates that Canadian provinces have imposed. The interest rates should be strictly followed. Any company that violates interest caps and usury laws may be sued in court.

British Columbia

The maximum interest rate on short term loans is at 23% of the principal. This should already include fees and bad credit loanscharges that are assessed during loan application. Only one loan may be requested at any one time. Payday lenders are not granted access to their borrower’s checking or savings account. The loan approved can be provided in cash and shall be paid off in cash too. In addition, lenders must strictly follow the term that they can only lend money no more than 50% of a borrower’s take home pay. In order to be eligible in lending bad credit personal loans, payday loan lenders are mandated to register under the Business Practices and Consumer Protection Agency.


The province of Alberta basically implements similar regulations as British Columbia when it comes to payday loan lending and operations.


The interest rate in the province of Saskatchewan is similar to that of British Columbia as well at 23% with a cap of 30% on defaulted payday loans. The borrowing limit is at 50% of the net salary of borrowers. In order to gain the ability of offering bad credit personal loans in Canada, payday loan lenders operating in Saskatchewan first need to pay a $2,000 for licensing per location.


Among all Canadian provinces, Manitoba seems to have the most restrictive rates for payday loans. The interest rate is kept at a low of 17%. Subsequent loans taken out by the same customer from the same company should be given at even lower rates.


The Payday Loans Act of 2008 duly limits fees and charges on loans approved in Ontario. The province is very strict and penalizes payday loan companies that violate the legislation on low interest rates.

Nova Scotia

The province of Nova Scotia probably features the highest interest rate permitted at 31%. Payday lenders are encouraged to give out loans at a maximum interest rate of 25%.

Prince Edward Island

Prospective borrowers living in Prince Edward Island can take out a bad credit personal loan with interest cap at 25% too.

Quebec and Newfoundland

The legislation on payday loans in these two provinces are very tight. The law mandates lenders to assess a mere 30 on annual percentage rate and a cap of 60% only. With these very restrictive terms, it is effectively illegal and unprofitable to lend money in both Quebec and Newfoundland.

How to Apply for a Bad Credit Personal Loan in Canada

Applying for a bad credit loan in Canada is relatively simple. Since these loans are unsecured in nature, prospective borrowers need not present any collateral to get approved for one. The application process is easy and hassle free. Most payday loan lending companies operate online, thus it is ideal to submit your application online as well.

Personal information, employment details, and bank information are most commonly required to be given by borrowers during application. All the important data given by borrowers are then double checked and verified. Once all information are confirmed, the total loan amount approved will then be transferred to the account number provided during application.

Depending on the payday loan lending companies, borrowers may agree to pay the bad credit personal loan electronically as well. On the predetermined payment date, the borrower is required to make a payment. Inability to pay off the loan gives lenders the right to assess late charges and finance fees.
Before making the decision of applying for a bad credit personal loan, make sure that you are committed to paying it on time. Non-payment of bad credit loans may not directly affect your credit standing, but you will still receive collection calls until the full loan amount plus late fees are finally paid in full.

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