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Higher Interest Rates and Strong Loonie – What Does That Mean for the Canadian Economy

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The Bank of Canada increased the key interest rate in September this year, justifying the move with a steady and sustainable economic growth and higher consumer spending. Interest rate hikes result in higher borrowing costs, help control inflation, and have a cooling effect on hot housing markets and economic growth. Low interest rates, on the other hand, encourage borrowing for both consumers and businesses and thus stimulate economic growth. A strong loonie indicates economic growth, makes imports cheaper, and affects exports.

Consequences

Strong Loonie, Exports, and Economic Growth

Canadian businesses that buy services and goods south of the border benefit from a strong loonie. Consumers also benefit from lower prices in the U.S. and discounted travel and vacations. At the same time, Canadian exports suffer, and the reason is that the U.S. is Canada’s major export partner. Together with real estate, the mining industry is the main driving force behind economic growth in Canada. The resource sectors, including forestry, metals, mineral extraction, and gas and oil extraction make for about 16 percent of Canada’s gross domestic product. Exports, on the other hand, account for about 32 percent of GDP, and the natural resources sector dominates by far. Exports stimulate economic growth but a strong loonie makes domestic goods and services less competitive. When the loonie is strong, manufacturers, exporters, the hospitality sector, and tourist operators are the main losers. A weak dollar has the opposite effect by triggering inflation and making goods more expensive in Canada.

Strong Loonie and Strategies to Adapt and Deal with It

When it comes to exports, it looks that Canadian exporters have adopted successful strategies to remain competitive and adapt to appreciation. These include enhanced efficiency and productivity, the use of imported raw materials to reduce production costs, and expansion to new markets. Imported raw materials and other inputs, for example, help boost productivity and offset the negative effects of foreign exchange exposure. Export diversification is another successful strategy to adapt when the Canadian dollar is strong. In 2003, for example, many companies began to export goods and services to new markets. While in 2002 some 70 percent of exports went to the U.S., a year later this figure fell by whooping 14 percent. This means that the percentage of goods and services exports to emerging markets rose substantially and actually doubled. As a result of diversification strategies, exports to the European Union, the Middle East, and Asia rose in proportion. The reason why this strategy turned out successful is that the loonie does not appreciate equally against the Euro and other major currencies. Thus businesses enjoy better profit margins through diversification. Another strategy that Canadian exporters use is to establish sales and distribution offices when expanding to new markets. This is less expensive than maintaining production facilities abroad and fosters cooperation with new partners to increase after-sales. Many are working on joint projects as well. Finally, buying imported goods and services is another strategy to offset the negative effect of a strong loonie. This helps boost the purchasing power of manufacturers, and the reason is that imported components, parts, and raw materials are cheaper and help cut production costs. This strategy works well by increasing productivity through investments in advanced technology to reduce production and operational costs and eliminate waste.

Hikes in Interest Rate, Real Estate, and Household Debt

Real estate, together with construction, insurance, and finance, accounts for about 27 percent of Canada’s gross domestic product. During the last years, low interest rates made borrowing cheaper and contributed to economic growth. Cheap debt and construction helped offset the negative impact of low oil prices. At a time of quick economic growth and expansion, hikes in interest rates help keep inflation in check. The recent move by the Bank of Canada can be explained by robust growth in all sectors and areas, including consumer demand, exports, and employment levels. Low interest rates resulted in a significant increase in consumer demand, partly fueled by debt. What is more, low rates made mortgage loans more affordable but also resulted in heavy borrowing, including more home equity lines of credit and uninsured mortgages. Individuals and households with high debt loads find it more difficult to adjust to income changes, whether as a result of loss of employment or a job change. A growing number of heavily indebted persons and households can have a negative effect on consumer spending, the financial system, and the economy as a whole. In this line of thought, interest rate hikes and a subsequent cooling of the housing market can have a positive effect on the Canadian economy. At the same time, finance experts agree that a housing bubble like the one south of the border is unlikely to occur. The reason is that Canada has higher underwriting standards for mortgage loans. Mortgage protection through insurance and other measures also means that a state of chaos is an unlikely scenario in Canada.

The Bank of Canada kept rates low in an attempt to offset the negative effects of low oil prices. For some experts, speculators and lack of housing supply are to blame for skyrocketing property prices in housing markets such as Vancouver and Toronto. For others, however, low interest rates are to blame and rate hikes can help fix this.

What Borrowers Can Do

Higher rates mean higher costs for Canadian financial institutions. Many worry that interest rate hikes will affect mortgage payments but this is not the case. With a rate increase from 1.7 percent to 1.9 percent on a $500,000 mortgage, borrowers pay about $40 more a month. A subsequent hike in interest rates is expected to have a similar effect. Even in this case, borrowers have the option to lock in their rates and opt for a fixed-rate mortgage loan. This is what many choose to do when interest rates rise. However, experts point out that a fixed-rate mortgage is a better option only if rates go up by 0.69 percent or more during the next couple of years. What we have seen so far is interest rates going up to 1 percent and then dropped by 0.5 percent over a 5-year period. With this in mind, a variable-rate mortgage with a low interest rate (i.e. 1.9 percent) makes more sense than a fixed-rate mortgage with a rate of about 2.6 percent. And according to Bank of Canada experts, subsequent rate hikes, if any, will be gradually implemented.

Are Housing Prices in Ontario and GTA Finally Going Down?

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Housing prices in Ontario and the GTA are down by 26 percent after the decision of the Ontario’s government to introduce a foreign-buyer’s tax. The new tax applies to corporations purchasing certain properties, non-permanent residents, and foreign nationals. The measure was introduced in an effort to cool down the housing market and stabilize residential property prices. The new tax also aims to curb speculative activities and is aimed at individuals who are in the game for a quick profit.

What Experts Say

Some experts warn that the market in Toronto and Ontario in general is in a bubble much like the 1980s. Others counter-argue by pointing to the fact that indicators such as demand for residential properties, population growth, and interest rates are more stable today than during the 80s. The situation was also very different then, with different factors at play, one being that the province was on the verge of recession. The only similarity that some experts see is that housing prices skyrocketed. Chief Economist Sherry Cooper also highlights the fact that in 2008, the U.S. experienced largescale foreclosures, market collapse, financial crisis, and underwater mortgages. In Ontario, none of this is happening.

The question now is – are housing prices finally going down for good? The drop in demand can be explained partly by the fact that many homeowners were quick to list their properties before housing prices reach peak values. At the same time, demand dropped substantially. When it comes to the introduction of the new foreign-buyer’s tax, experts point to the fact that foreigners are a small percentage of all buyers to cause prices to plummet. Plus, the majority of foreigners who purchase a property in Ontario qualify for a rebate. In fact, a press release by the Toronto Real Estate Board reveals that less than 5 percent of home purchases in the Greater Toronto Area involve a foreigner.

Some experts claim that the sharp decline in property prices is mainly caused by domestic investors withdrawing from the housing market. There is a significant decline in demand for residential housing purchased to rent. The main reason for experts is that investors wait to see how the new set of measures will affect the market. If this is the true state of things, then the housing market will continue to fluctuate.

Counter-Arguments: Prices Are Not Going Down

The Toronto Real Estate Board, for example, published a report according to which housing prices are expected to grow due to a high demand and a more limited supply of new listings. The expected increase in sales prices is up to 16 percent. The average price for residential housing is in the range of $800,000 – $850,000. Townhouses, semi-detached houses, and detached homes will see the strongest price increase in 2017. Affordable housing is a concern for many in light of the fact that prices are expected to increase at a quicker rate compared to income growth. According to the Toronto Real Estate Board, policy makers must devote time and energy to develop policies to solve the main problem and namely, the shortage of residential housing for rent and sale. Close cooperation between non-governmental organizations, businesses, and the public sector can help to this end.

Trends

A recent survey by Ipsos shows that the majority of new homebuyers are ready to make a considerable down payment of more than 27 percent. Money comes from different sources, including home equity, gifts from family members, savings, etc. This is an indicator that demand is stable and the market is not cooling down.

The Toronto Real Estate Board analyzed how factors such as price growth, supply, demand, and affordability come into play. The Canadian Centre for Economic Analysis was tasked to study the link between housing prices and factors such as Metrolinx and enhanced transit in general. The study reveals that Metrolinx has a positive impact on home prices in the Greater Golden Horseshoe and the Greater Toronto Area. This is due to the fact that more and more residents have the chance to commute and benefit from the improved infrastructure. The RER is expected to increase home prices by as much as 12 percent.

At the same time, a survey conducted by RBC shows that about 25 percent of residents plan on buying or investing in a residential property. This figure was 30 percent in 2016. There are three factors that come into play, one being uncertainty whether the Canadian economy is performing robustly. Housing affordability is another factor and a growing concern. A third factor is the belief that prices will eventually go down. Whether this will happen and whether prices are finally going down is still unclear. Figures show that prices have gone up by as much as 33 percent in just one year.

Premier Kathleen Wynne admits that measures and policies to cool down the housing market often have unintended consequences. The provincial governments and authorities are not in the position to control residential housing price growth or capital gains taxes. The only tool that provincial governments have is land transfer tax. What they already did was to increase the land transfer tax rebate, which resulted in savings of about $2,000. The Finance Minister announced that the government will develop a set of new measures to cool down housing prices but there is no clarity on what the measures will be. When it comes to policy making, the problem is that stakeholders can’t reach a consensus on the root of the problem. Some experts argue that the real problem is the shortage of land, others point to the shortage of low-rise residential homes, and still others argue that foreign buyers are to blame. And while it is still unclear whether prices in the GTA and Toronto are finally going down, it is clear that rising prices mean high demand and vice versa.

Top Canadian Travel Credit Cards

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Canadian banks, unions, and other providers offer specialty credit cards with travel rewards such as airmiles or rewards points, no foreign transaction fees, exclusive access to events, concierge service, car rental insurance, and other add-ons.

MBNA Rewards World Elite

MBNA offers a travel credit card with a welcome bonus of 10,000 points after the first purchase or transaction. Customers earn 2 points per each $1 they spend for an annual fee of $89. The points you accumulate have no expiration date, and there is no limit on the points you can earn.  You can redeem them in different ways, including electronics and featured items and merchandise such as sunglasses, necklaces, pizza sets, flatware, electric shavers, microwaves, cordless gas trimmers, and a lot more. There are added incentives such as travel coverage, including legal and lost luggage assistance and lost ticket and document replacement. Customers with a combined household income of $150,000 qualify (or personal income of $80,000).

  • Cash advance rate: 24.99 percent
  • Access check and balance transfer rate: 21.99 percent
  • Purchase rate: 19.99 percent

RBC Visa Infinite Avion

This Visa card by RBC also offers great travel benefits such as comprehensive insurance coverage, including rental car insurance, hotel, trip, and emergency medical coverage, and trip cancellation. In addition to extensive coverage, customers also benefit from the fact that there are no seat restrictions, whether traveling during low season or peak season. RBC also guarantees that there are no blackouts and features a generous rewards program whereby $1 spent on the card equals 1 bonus point. Travel purchases bring an extra 25 percent. A generous welcome bonus of 15,000 points is an added incentive to start collecting points.

  • Cash advances: 21.99 percent
  • Purchases: 19.99 percent
  • Annual fee: $120
  • Annual fee on supplementary cards: $50

This card also has an income requirement of $100,000 (for households) and $60,000 (for your annual personal income). Customers who meet the income requirement can take advantage of add-ons such as dining and hotel benefits, access to exclusive events, and optional coverage. Optional insurance includes identity theft protection, RBC Road Assist, and travel insurance.

Aspire Travel™ World Elite MasterCard

Offered by Capital One, this rewards card also tops the list of travel products with extensive insurance coverage, including trip cancellation, flight delay, and emergency medical coverage. In addition to travel assistance, cardholders are also offered car rental collision and baggage delay insurance. The card also goes with baggage loss and flight delay insurance as well as trip interruption coverage. There are added benefits such as the option to add an authorized user free of charge. Each dollar in purchases earns 2 bonus points. The welcome bonus of 400,000 is offered to customers who charge $1,000 on the card during the first three months. This equals $400 that can go toward travel or other purchases. There are no restrictions or limits on the points you can accumulate. Customers with spotless credit qualify provided that they can show proof of household income of at least $150,000 or personal income of at least $80,000. If you meet the eligibility criteria, you also enjoy concierge services such as tickets for exclusive events, special privileges, dining reservations, and plenty more.

  • Annual fee: $150
  • Cash advance and balance transfer rate: 19.8 percent
  • Purchase rate: 19.8 percent

TD Aeroplan Visa Infinite Card

Offered by Toronto-Dominion, the Aeroplan Visa Infinite Card is a specialty product with travel rewards and complementary benefits. These include access to the Maple Leaf Lounge (Air Canada), priority check-in, first checked bag, and priority boarding. Complementary travel benefits are offered to customers flying onboard under the Air Canada Express as well as flights by Air Canada Rouge and Air Canada.  Cardholders are also offered comprehensive travel insurance, including emergency medical travel, auto rental collision, travel medical, and trip delay insurance. The coverage also includes flight delay, lost baggage, and delayed baggage insurance. Emergency travel assistance is offered as well. Customers also benefit from car rental discounts at Budget and Avis Rent-A-Car. When it comes to travel rewards, Toronto-Dominion offers 1 point per $1 on everyday purchases and 1.5 points per $1 on travel purchases at aircanada.com, grocery purchases, as well as drugstore and gas purchases. You earn at a double rate with your Aeroplan Membership Card on purchases at participating retailers. The miles or bonus points you earn can be redeemed in different ways, including travel fees and taxes. You can use them to cover surcharges as well.

The list of exclusive benefits includes hotel privileges, food and wine experiences offered by Visa Infinite, and concierge service that covers restaurant recommendations, travel assistance and recommendations, etc. To benefit from all this, you must have an annual household or personal income of at least $100,000 or $60,000 respectively. Only applicants who are Canadian residents and are of legal age meet the eligibility criteria.

  • Credit limit: $5,000 or higher
  • Cash advance rate: 22.99 percent
  • Purchase rate: 19.99 percent
  • Annual fee for authorized users: $50
  • Annual fee: $120

American Express Gold Rewards Card

This rewards card offered by American Express is also worth a quick look when it comes to travel benefits. Amex offers a welcome bonus of 25,000 travel points on the first $1,500 charged during a 3-month period. While it is a charge card, you collect 2 rewards points per each dollar spent on purchases, including travel expenses such as cruise and flight travel, grocery and gas, etc. The annual fee for primary cardholders is $150. Extensive insurance is offered, including lost baggage and trip interruption coverage.

Aerogold Visa Infinite Privilege Card by CIBC

CIBC also has a great specialty card on offer, available to customers with a household income of at least $200,000. The Aerogold Visa Infinite Privilege Card features comprehensive insurance benefits such as trip cancellation and emergency medical coverage for out-of-province travel. Air Canada benefits are also offered, including first checked bag, priority boarding, etc. Each dollar you spend earns a total of 1.25 rewards points on regular purchases and 1.5 points on purchases at aircanada.com as well as drugstore and grocery store purchases and gas. Customers are offered bonus rewards points at select online and other retailers. Cardholders with a diamond, black, and silver status benefit from additional privileges and need fewer points for flight bookings. When you book an Air Canada-operated flight, you are entitled to a discount companion Business Class ticket (50 percent off). What is more, you are free to cancel and book flights at any time and up to 120 minutes before departure. Additional benefits for cardholders include luxury hotel benefits, access to live music events, attractive ski offers, and plenty more. The list of added incentives includes priority access to fast lanes, discounts on valet services and parking, as well as limo and taxi services. Priority Pass allows cardholders to take advantage of lounge visits up to 6 times a year at more than 850 airport lounges around the world.

The Aerogold Visa Infinite Privilege Card also goes with a comprehensive package of insurance benefits such as hotel and motel burglary, common carrier accident, and auto rental collision coverage. Holders are also offered baggage delay coverage, trip interruption insurance, flight delay, trip cancellation, and emergency travel medical coverage.

  • Cash rate: 22.99 percent
  • Purchase rate: 19.99 percent
  • Annual fee on supplementary cards: $99
  • Annual fee: $399

RBC Avion Visa Infinite Privilege

A yet another card by the Royal Bank of Canada, Avion Visa Infinite Privilege is a great choice for frequent travelers and comes with a comprehensive insurance package. The coverage includes trip interruption insurance, purchase protection, and trip cancellation and emergency medical coverage. The concierge service is an added benefit to take advantage of travel assistance, restaurant and ticket bookings, and more. In addition to a welcome bonus of 25,000 points, customers earn points at a generous rate of 1.25 bonus points per $1 spent on everyday and regular purchases. The best part is that you can redeem your points in different ways, including tours and travel packages, hotel stays, vacations, etc.

Again, there is an income requirement to meet – at least $200,000 for both households and individual customers. If you qualify, you are offered access to exclusive privileges such as automatic hotel room upgrades, late check-out, and more. There are optional extras to look into, for example, travel insurance, travel assist, and identity theft protection. The Balance Protector package also covers loss of self-employment income, involuntary unemployment, total disability, accidental dismemberment, critical illness, and loss of life.

  • Cash advance rate: 21.99 percent
  • Purchase rate: 19.99 percent
  • Annual fee for additional cards: $99
  • Primary holder annual fee: $399

Only customers with no recent bankruptcy records qualify. This card is available to Canadian residents and citizens only.

Canada’s Top Ten Secured Credit Cards

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When it comes to considering secured credit cards in Canada, you have quite an array of options to choose from. They come with different interest rates, annual fees, rewards, benefits, and minimum deposits. Here are some factors to consider regarding guaranteed credit cards, and a side-by-side comparison of Canada’s top ten!

What is a Secured Credit Card?

A secured, or guaranteed, credit card works on the same principle as a secured loan. With a secured loan, the lender has some tangible guarantee (like a home or car) that can be taken as collateral if the borrower should default on the loan. That’s why mortgage companies and lenders are willing to loan out large sums of money to people—because they know they’ll get either the money (and interest) in payment, or else they’ll get the property that was put up to secure the loan.

In the case of a secured credit card, the collateral is a sum of money you deposit when you are issued the card. The lender can be confident that you’re not a risk, because they already have your money in hand.

What Are Secured Credit Cards Good For?

So why even get a secured card? If you have the cash-in-hand sufficient for a deposit, you could just use your cash, right? Well, maybe not. You can’t use cash to purchase merchandise online, to make reservations, or even to pay some bills. Where a check or credit card is required, you’ll be out of luck if you don’t have a bank account or a card.

If your poor credit prevents you from qualifying for a regular credit card, or if you don’t yet have a credit history in Canada, you can still enjoy the convenience of paying for goods and services that require credit cards. You can also use that card to build (or rebuild) that credit score so you qualify for bigger things in the future.

Rebuilding Your Credit with a Secured Credit Card

If you’re looking to repair your credit rating, a secured credit card is one of the best tools at your disposal. You might think it’s wiser to “play it safe” and use cash, but that actually hurts your credit score. You actually need credit transactions in order to build up your score, so it’s important to use your secured card with intentional care.

Make sure that you make all your payments on time. That’s the number one thing you can do to repair your credit. A late payment of even a few days will undo a lot of your work toward credit repair. After a period of time making punctual payments, however, you will see your credit score improving visibly.

Top Canadian secured credit cards

Peoples’ Trust Secured Credit Card

* Annual fee: $70
* Interest: 12.99% on purchases, 24.5% on cash advances
* Minimum required deposit: $500
The relatively low interest rate on this card makes it attractive to people who might be carrying a balance on the card. Applicants need to have a bank account and a verified income in order to apply for this card. This card charges a fee of $5 for cash advances, and a $5 fee if you overreach your credit limit. *Please note that this card is no longer available.

Home Trust Secured No Annual Fee Visa

* No annual fee
* Interest: 19.99%
* Minimum required deposit: $500
This card is ideal for people who expect to pay their balance in full every month. The interest rate is higher, compensating for the lack of annual fee, but this won’t affect you if you’re going to be paying your balance in full every month. The Home Trust card enables you to add another authorized user, and its credit limit may be as much as $10,000.

Home Trust Secured Low Interest Visa

* Annual fee $59
* Interest: 14.9%
* Minimum required deposit: $500

Of the two Home Trust cards, this version is preferable for people who might be carrying a balance from month to month, because the interest applied to that balance will be lower with this card. Applicants need to have a bank account in order to apply for this card.

Capital One Guaranteed Secured MasterCard

* Annual fee: $59
* Interest: 19.8%
* Minimum required deposit: $75

This easy to get credit card has one of the lowest minimum deposits, so it’s a good choice if you don’t have the $500 required by many of the other card companies. Its uses are less advantageous, since it has both an annual fee and a high interest rate, but it’s an option that’s open to you if you can’t afford the bigger deposit to get started.

Vancity Enviro Secured Visa

* No annual fee
* Interest: 19.5%
* Minimum required deposit: $500

Vancity offers a variety of extra perks, including insurance for travel accidents, price protection, and insurance for lost baggage. The card also has a system of reward-points for spending, called My Visa Reward Plus. The rewards include options like travel, redeeming for purchases, and charity donations.

The Vancity line of Classic credit cards includes several combinations of annual fee and interest rates, allowing you to choose the best solution for your situation. The options range from no annual fee and higher interest of 19.5% (for people who don’t plan to carry a balance) to a card with a $50 annual fee with lower interest of 11.25%.

Secured Credit Cards Offered by the Big 5 Canadian Banks

Secured cards are offered by all of the “Big Five” Canadian banks, and with relatively similar features. You will find that it’s difficult to uncover information on these cards online, and almost all of them require you to apply in person at the branch office.

You can inquire about details at the branch nearest you—and that’s not a bad thing. Although we’re accustomed these days to be able to do almost anything online, there’s something to be said for a face-to-face conversation with an expert who can talk to you about the pros and cons and details of the card for which you’re applying. So take the information below if it helps you to decide on which bank you’d like to visit, but know that any of these five banks will likely require you to apply in person.

Royal Bank of Canada (RBC) Secured Credit Card

* Annual fee $20
* Interest 11.99 on purchases & cash advances
* Minimum required deposit: $500

This low interest card with its modest annual fee is well suited for people who expect to be carrying a balance from month to month. Its optional extra features include travel insurance, roadside assistance, credit monitoring, and automatic payment options.

The RBC secured credit card charges fees of $3.50 for a cash advance ($5 if you’re out of the country) and an overlimit fee of $29 per statement period if your balance goes above your credit limit.

Bank of Montreal (BMO) Prepaid Credit Card

* Annual fee: $6.95
* No interest

The Bank of Montreal uses a prepaid model as its secured card option, meaning you can choose what amount you’d like to load to the card. It gives you more flexibility upfront (you don’t have the $500 minimum many other cards require) but doesn’t allow you to spend more money than you have on the card, or to take cash advances. The card itself operates much like a debit card, but without the associated checking account.

Toronto-Dominion (TD) Secured Credit Card

* Annual fee: $29
* Interest: 19.9%
* Minimum required deposit: $500

To apply for a Toronto-Dominion card, stop in at a TD branch office for an application. Your credit limit will be equal to whatever amount you are approved for, and deposit up front. If you maintain your TD secured credit card successfully for seven consecutive months, you can be eligible for an unsecured card as the next step toward repairing your credit.

Canadian Imperial Bank of Commerce (CIBC) Secured Credit Card

* Annual fee: $29
* Interest: 19.9%
* Minimum required deposit: $500

Like the TD card, you will need to apply in person for a CIBC secured credit card, by stopping in at a TD branch office for an application. Your credit limit will be equal to whatever amount you are approved for, and you make the deposit up front.

CIBC will give you a card for a specific term, usually two years. At the end of the two years they’ll refund your deposit—and by that time you will probably qualify for an unsecured card if you’ve used your secured card wisely.

Scotiabank Secured Credit Card

* No annual fee, no balance transfer fee
* Interest: 16.99%
* Minimum required deposit: $500

The no-fee Value Visa card is a great option if you’re looking to transfer balances from other credit cards. There’s no fee for balance transfer, and the introductory APR is a low 3.99 percent for the first six months. (That rate goes up to 16.99 percent after the introductory period, so try to pay off your balance before you hit the six-month mark.)

In Conclusion

Secured credit cards are the best way to improve your credit score, or to establish one if you are new to Canada and don’t have a financial history in this country. With your secured credit card you will enjoy all the benefits of credit card membership, like making purchases online and over the phone, or accessing cash from ATMs.

Your life will feel easier and your daily transactions will be smoother once you have a secured credit card at your disposal. Enjoy all the advantages of having a card, like being able to make reservations or purchase items online. And build your credit score as you go, by making sure to handle your card finances wisely.

Your secured credit card can serve as a stepping-stone to bigger things, like unsecured cards, car loans, or even a mortgage. Used wisely, the secured credit card is a gateway to your future. Let your credit score soar!

Getting a Personal Loan with Bad Credit in Canada

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Getting a loan after a personal financial crisis may seem like it’s impossible. If you have had to file bankruptcy or experienced a personal crisis that hit you hard financially, you probably feel like there’s nowhere in Canada to turn for a loan. The good news, though, is that you’re wrong! You actually have a multitude of options for bad credit loans in Canada.

How is it possible?

As you do your research on loans, you will find that there are plenty of available loans for people with bad credit. There are some lenders who are more willing than others to take a chance on bad credit personal loans. There are also different types of bad credit loans that reduce the risk for the lender, rendering them more willing to loan you the money you need.

You may be new to Canada and trying to make your way without an established credit history in this country. Or you may have gotten overwhelmed by a medical or other crisis that constricted your finances and caused your credit score to drop drastically. In either case, you might be desperately in need of funds to get you back on your feet—and all that at a time when it seems hardest to qualify for a loan.

That’s why bad credit personal loans are the answer for you. They are designed specifically for people in your situation, and some of them even have guaranteed acceptance. You may find that the interest rate is higher or the conditions different than they would be if you had better credit, but the fact remains that you can get a loan!

You will find that loans for bad credit come in many shapes and sizes. Here’s a basic break-down to help you navigate the confusing landscape of loans!

Secured Personal Loans

A secured loan is one that lets you offer an asset as collateral, essentially pledging that asset to the lender as assurance that you will pay back the loan. Common secured loans include car loans (for which the car itself is the pledged asset) and mortgages (for which the home is the promised item).

Secured loans come in all shapes and sizes, from the pawn-shop transaction (in which your pawned property is held as assurance on the loan) to purchasing a house. If you already own your home, you might be able to take out a second mortgage against the equity you have in the home. You might be able to take out a line of credit against property you own. If you aren’t a home-owner, you can consider taking out a loan against the title of your car, or even pawning a valuable asset like a firearm or jewelry.

Unsecured Personal Loans

An unsecured personal loan differs from the secured loan in the fact that it lacks collateral. If your credit is poor, you are less likely to qualify for an unsecured loan because the lender will consider you a greater risk, and will most likely want collateral to back the loaned money.

One unsecured loan for which you might qualify, however, is the student loan. In the case of a student loan, the lender looks at what the loan is buying—essentially, a higher level of education and (presumably) increased earning potential. Whether you intend to attend a trade school or a university, the credentials you earn will result in an increase of income, enabling you to pay off the loan once you finish school. Most student loans have the advantage of not requiring any payments until you have completed your schooling.

Unsecured Credit Cards

You may not have thought of it in the light of a loan, but that’s essentially what credit cards actually are. They provide access to a line of credit that can be used at any time, in any amount up to the established credit limit.

When you purchase a five-dollar sandwich with your credit card, you are borrowing those five dollars from the credit card company; they have just bought your lunch for you, and you don’t owe them anything back until the due-date on your monthly statement. At that point you can pay off the full balance, in which case you have borrowed their five dollars without even paying interest on the loan. Or you can pay a portion of the balance, and begin owing interest on the remainder.

As with an unsecured loan, you might have a more difficult time qualifying for an unsecured credit card if your credit is poor. You might consider applying for credit cards issued by retail stores, which sometimes have a greater “tolerance” for bad credit. A department store wants to lure you into their store to shop there, which you are more likely to do if you get rewards from their proprietary card—and that means they’re more likely to give you a card than some of the big companies that specialize exclusively in credit cards.

Secured Credit Cards

Like a secured loan, a secured credit card uses collateral to offset your bad credit. When a bank or credit card company issues you a secured credit card, you will make a deposit to an associated account to which you don’t have access, except through the use of your card. If you deposit $500, then that is your spending limit. You can make purchases in stores or online, and you can get cash from ATMs with that card, up to the monthly amount that equals your deposit.

The obvious down side to a secured loan is the fact that you have to come up with that deposit up front. If you’re looking for a loan because you’re in need of cash right now, then you probably don’t have the resources to open this type of credit account. But remember that you’re still going to have access to the money deposited, through use of the card. You can put $500 down as a deposit for that card, then turn right around and pay $500 on a bill or car repair or needed purchase.

The huge benefit of using your money this way is that you can begin to rebuild your credit. Make your minimum payments on time, and you are creating a track record of “timely payments” that will reverse the downward spiral of your credit rating.

Home Equity Line of Credit (HELOC)

The HELOC is a form of secured loan in which you borrow money and use your home (or at least the equity you have in your home) as collateral. If you take the value of your home (let’s say $200,000) and subtract the amount you still owe on the home (we’ll say $180,000), the difference of $20,000 is the equity you have in that home. Essentially, it’s how much of the home you have already paid for. Even though you already have a mortgage on the house, you may be able to apply for a line of credit on that equity.

Some people choose to refinance their existing mortgages for a larger amount, in order to use the extra funds for remodeling or paying unexpected car-repair bills or some other purpose. If you’re canny about it, you might even end up with a lower interest rate than what you’re locked in to with your original mortgage.

Installment Loans

An installment loan is a loan that comes with a payment plan—a certain number of payments, each for a certain amount, spaced out over a certain amount of time. The interest rate for an installment loan is generally locked in when the loan begins, and the interest that will be paid over the life of the loan is included in the payment amounts.

If you are negotiating an installment loan in Canada, consider looking for one that will allow you to make extra payments at times when you have the resources to do so. An extra payment (or an extra amount added to your monthly payment) will go entirely toward the principle, which is the remaining amount of the original loan, without the interest included. By paying down the principle, your loan will diminish more quickly, and you will not only pay it off early, but also end up paying less interest overall.

This type of loan is often available through banks and financial institutions, or you can search for online installment loans for bad credit in Canada.

Payday Loans

A burgeoning business in Canada is that of payday loans. These are unsecured loans in the sense that you do not need to provide a car title or other form of collateral, but they do require proof of a steady source of income. The lender is forgoing the requirement of collateral to assure your payment because you are able to show that you will have the resources to repay the loan when you receive the next paycheck.

Because there is no collateral attached to the loan, payday lenders are assiduous in assuring themselves of your earnings, as well as your other financial liabilities. Your application will include proof of your income for the last few months, as well as disclosure of your regular bills and any other payments to which you are committed. The amount of your loan will be determined by that combination of figures; specifically, the lender is unlikely to loan you more than you would be able to spare from your next paycheck after you have paid your fixed expenses and bills.

Generally speaking, a payday loan will be due in full on the date of your next paycheck, and the interest rates tend to be very high. If you’re in a jam and need cash between paychecks, this can be a lifesaver, but some people end up in a worse jam if they find themselves accruing high amounts of interest if they are unable to pay off the loan in time.

Title Loans

Title loans are a form of bad credit car loans in which the lender takes the title of your vehicle as collateral on the loan. You can often borrow more than you could get from a payday loan, because they have the collateral of your car, but you do have to make sure not to fall too far behind on your payments if you don’t want your car repossessed. The interest rates on these loans are often very high, but they can be an option if you don’t have a regular paycheck, or if you need money quickly and in a higher amount than the payday loan will offer.

Other Options to Consider

Depending on your situation, you might find some additional alternatives for getting the loan you need. If you’re having no luck with financial institutions (or if you’re hoping to avoid the high interest charged by some of them) you might consider asking a friend or family member if they will loan you the money they need. With a promise of some interest, not to mention the chance to help out a friend, they might be willing to oblige.

Another option to consider for personal loans in Canada would be a co-signer, if someone close to you (and with a better credit score) is willing to vouch for you on the loan.

How to get a Bad Credit Loan

You can apply for bad credit loans in person at an institution offering payday loans or title loans. You can also look into online loans in Canada, and apply conveniently from home. Most online options will transfer funds directly to your bank account or prepaid card as soon as your loan application is approved.

In most cases you can see your money the same day, whether applying online or in person. Just because you have a bad credit rating, there’s no reason to suppose that you can’t get that loan you need.