The relationship that exists between the lender and borrowers or loan applicants is such that involves trust that the borrower and applicant will repay the cash loaned out with interest and charges. In Canada, lenders, which are mostly financial banks and direct lenders need to be sure and confident that every borrower will repay their money as agreed. Loans are made and designed in such a way that it will always protect the interest of both lenders and borrowers with
However, for all forms of a loan under the unsecured loans, there is no need for collateral and as such, it is termed ‘unsecured’. Unsecured loans are given and approved for applicants based on a document that testifies that the applicant will repay the amount of money loaned out by the bank. The document is called a credit score and it details the debt history of every individual and how well those debts were paid. For individuals that fail to pay up debts and any other interest and charges, their credit score will be low and very poor while those that pay all cash and fees at agreed time will have and retain a good credit score. In Canada, credit score is handled and compiled by two independent agencies; Equifax Canada and TransUnion Canada.
Moreover, the credit score and report stand as an important requirement for most unsecured loans because banks use it as a measure of trustworthiness of borrowers. There are some types of unsecured loans that can be approved for bad credit score individuals and this include payday loans. A payday loan is the most popular loan among people with poor or bad credit score. This is because it requires no credit check and it offers fast, quick and immediate approval from banks. Having a bad credit is bad because it reduces the number of loans an individual can access but a payday loan, If not well managed can plunge an credit individuals into a worse situation. This is because the payday loan has a very high-interest rate with some other charges and fees tied to the checking bank account of every approved a . Many a credit individuals soon find themselves unable to pay up other loans while they keep an undisciplined lifestyle that made their credit score bad.
Recently, there is an influx of many online financial firms that offer loans to people with bad credit score. These firms may be likened to a business trying all legal means to create a niche as a player in the financial industry. Individuals with bad credit may patronize the online loan portals but must be very mindful of the terms and conditions before applying for any type of loan.