Getting approved for loans in Canada with no credit check sounds a bit far-fetched. That is until you google it and find out how easy it really is!
Maybe you are in need of some quick cash due to some unexpected expense. It could be a medical emergency, a vital appliance repair, or the family car that finally broke down. Or perhaps you’re just a bit short on cash and trying to stay on top of your bills to avoid paying a hefty fine.
The good news is that Canadians have plenty of available options to choose from when it comes to no credit check loans. And there are several advantages to it, as opposed to the more traditional loans (banks or other institutions).
For starters, no credit check lenders do not rely on your credit score to evaluate your creditworthiness. So, what can replace the credit report to get the loan approved? Let’s explore the options:
Credit Score Alternatives
Lenders not using credit ratings in their underwriting procedures might require alternative verification forms such as bank statements.
By checking how much money on average passes through your bank account monthly, the lender can determine if you can actually afford the loan. If you already have too many financial responsibilities, you might have to solve some of them before taking on a new one.
If you are interested in no credit check loans but don’t have enough faith in your credit score you can also consider providing collateral as security (like a vehicle, for example). This will protect the lender and absolve you from having to produce a credit history or other bank statements. All this while greatly increasing your chance for approval.
Another bypass method is getting yourself a guarantor, also known as a co-signer. They need to be someone with a solid income and a good credit rating. Also, they need to be comfortable with accepting the loan responsibility in case you fall back on your contract.
Keep in mind that your co-signer’s credit may come under scrutiny to determine their creditworthiness. However, once approved, you should be able to obtain a more reasonable interest rate for your loan.
Most Common Types Of No Credit Check Loans
Payday Loans
Usually between $50 and $1,500, with a short repayment period of around 14 days and high interest rates (usually around 500%).
Car Title Loans
Interest rates as high as 60% with a 3 month to 3 years term. The amount you get is tied to the equity in your car.
Guarantor Loans
A third-party payback guarantee. A credit check may be required for the guarantor.
Personal Installment Loans
Repaid over a fixed number of scheduled payments. Usually, at least two payments are made towards the loan. Amounts can go as high as 50K with an APR (annual percentage rate) between 2.99 to 46.96% and a 3 to 120 months loan term. No application fees.
Can You Secure a Mortgage On a Bad Credit Score?
Your credit score is the number assigned to you by a credit bureau (the two major Canadian ones being Equifax and TransUnion) informing lenders on how you’ve dealt with available credit in the past.
Judging several criteria, the bank or lending agency will determine the level of risk involved and will assign you a number between 300 and 900. The higher the score, the lower the mortgage rates. Here’s are few of the most common requirements:
A Higher Down Payment
Most lenders require at least a 5% down payment for a new home purchase. Bad credit might boost that figure up to 20%. The higher you are able (or willing) to go, the bigger the chances for approval.
Proof Of Income
Of course, the borrower needs to show they can return the loan. Lenders usually apply the GDSR formula (Gross-Debt-Service-Ratio) to get a rough view of how much of your monthly income will go towards the mortgage. Many lenders will try to push for a mortgage on a 35% GDSR, but you should fight to keep your GDSR below 30%.
Professional Property Appraisal
The lenders need to make sure that the property is worth more than the amount of the mortgage. That way, in case you default on your loan and they take legal action on the property they can sell it and recover their money.
A Co-Signer
This is a form of warranty, insuring the lender that if you run late on your payments, a trusted friend or relative will be legally required to step in.
Securing a mortgage or home equity loan with credit below the 300-mark is still possible if you take the right steps. Getting a mortgage broker on board is highly recommended, as they can help you better navigate through the process and improve your approval chances.
Mortgage brokers are well connected and can find you the best lenders willing to provide no credit check loans or a bad credit loan.
No Credit Check Loans – Advantages vs. Disadvantages
No credit check loans provide some clear benefits, but you need to be aware of certain drawbacks before deciding.
Pros
Naturally, getting the financial support you need even though you don’t qualify for a bank loan. Also, the procedure is much swifter, so you can expect to apply for the loan and get it the same day.
Cons
There is a higher risk for the borrower to wind up in a debt cycle. Loans with no credit check in Canada come with a high interest rate and short repayment terms, which might prove to be a challenge.
Some borrowers end up taking a new payday loan just to pay off the older one. Also, more lenient regulations mean higher-risk lenders. While most no credit check loan lenders are legitimate, there are also many “sharks” (predatory lenders) looking to trap financially desperate people in a cycle of debt.
A professional broker can also help you find a legit lender, settle an affordable interest rate and a reasonable payback term.
“Any Credit Accepted”
This has become the war cry of many nonconventional lenders across Canada. If you are looking for a loan but are worried about your past credit mishaps, there are plenty of no credit check lenders interested in your business. Do the research, minimize the risk and get the financial peace of mind you need.
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