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Fortunately, getting a bad credit rating does not mean the end of the world. In fact, it is still possible to get a loan in Ontario even if you have a less than ideal credit standing. As long as you start making smarter choices from now on, there is also a big chance that you will be able to manage your finances better and rebuild your credit. Listed below are some tips to help you get that much needed loan to get you started on your path to financial recovery.

 

Differentiate between loan types

There are two types of loans that you can expect to receive if you have a bad credit rating. The first type of loan is the secured loan. A secured loan can entice borrowers by providing low interest rates and more flexible payment plans. You are also given the option to deduct the interest on these types of loans depending on your payment terms. These large loans are often used to cover expenses such as mortgages and student loans. However, in order to acquire this type of loan, you must be able to provide some form of collateral, such as a car, a piece of property, or a house.

Conversely, an unsecured loan or a personal loan does not require any form of collateral and instead compensates for the higher risk involved by imposing higher interest rates. These interest rates are also considered as non-tax deductible. Compared to a secured loan, an unsecured loan also usually comes in smaller amounts since they are primarily used to cover smaller expenses such as home repairs or unexpected expenses in the case of a break-in or natural disaster.

 

Avoid cash advances and deceptive payday loans

Though it might seem convenient to acquire small-amount loans on those days that you are running a bit short on cash, the added fees that you pay for those short-term payday loans will eventually add up. Unless you religiously follow the payment deadlines, you might end up drowning in even more debt from those small loans.

It should be noted that the interest rates for most payday loans can run anywhere from 200% to 300%. Some banks and private lenders can even charge up to 500% in interest for those sudden payday loans.

Cash advances on your credit card can also end up costing you a pretty penny if you are not careful with your borrowing and payment patterns. The interest rates for credit card cash advances can run upwards of 30% if you factor in all the necessary fees.

 

Know your limits

In truth, the best way to get the most out of your loan without incurring even more debt is by borrowing within your means. While a bank might look into your financial profile to determine just how much you should borrow, a private chain that will accommodate a high-risk loan will not be able to provide you with that kind of advice. Your best bet would be to evaluate your own capabilities and determine the amount that you can borrow and pay for.