Bad Credit Loans in Canada: The Real Rates You’ll Pay

August 22, 2026 3 Min Read

Bad credit loans get sold hard in Canada. Search the term and you land on lead-gen sites and lenders, all pushing you toward an application before telling you the real rate. The honest number: expect somewhere between 10.99% and 29.99% on a personal loan with poor credit, and a similar story if you’re financing a car or buying a home with a small down payment.

Quick Answer: Bad Credit Loans in Canada

Bad credit loans in Canada typically carry rates from 10.99% up to 29.99%, depending on your credit tier and the lender. Car loans follow the same pattern, with used-car financing running higher than new-car financing due to added risk. If you’re buying a home with less than 20% down, you’ll need a high-ratio mortgage, which requires mandatory CMHC insurance costing roughly 4% of your mortgage at a 5% down payment. Poor-credit borrowers often need a bigger down payment or a co-signer to qualify at all.

Bad Credit Loan Rates by Credit Tier

Rates in Canada move in clear bands by credit score. Excellent credit, 750 and up, sees 3.99% to 6.99%. Good credit, 660 to 749, runs 5.99% to 9.99%. Fair credit, 560 to 659, climbs to 8.99% to 14.99%. Poor credit, under 560, runs 10.99% up to 29.99%.

That top end matters. A loan at 29.99% costs dramatically more over its term than one at 10.99%, even with the same balance. If your score sits near the bottom of a tier, a small credit improvement before you apply can shift you into a meaningfully cheaper rate band.

Bad Credit Car Loans and Horrible Credit Car Financing

Car financing follows the same credit-tier logic, with one extra twist: used cars cost more to finance than new ones. New vehicle financing averages around 4% to 7% for well-qualified buyers. Used car rates run noticeably higher, since lenders price in faster depreciation and more mechanical uncertainty.

If your credit is poor enough that lenders call it “horrible credit” financing, expect two extra conditions on top of a higher rate: a bigger down payment, and sometimes a co-signer requirement. Both reduce the lender’s risk, which is the only lever that brings your rate down meaningfully at this tier.

What Is a High Ratio Mortgage?

A high ratio mortgage is any mortgage where you put down less than 20%, technically a loan-to-value ratio above 80%. Canada’s minimum down payment rules are tiered. It’s 5% on homes up to $500,000. It’s 10% on the portion between $500,000 and $1.5 million. Above $1.5 million, you need 20% down across the whole price.

Every high ratio mortgage legally requires mortgage default insurance, through CMHC or a private insurer. This protects the lender, not you, but you pay the premium. At 5% down, that premium runs roughly 4% of your mortgage balance, added onto your loan. Despite the added insurance cost, high ratio mortgages often carry lower interest rates than conventional ones, so the real cost comparison depends on how long you hold the mortgage.

Does Bad Credit Affect a High Ratio Mortgage Too?

Yes. Mortgage default insurers set their own credit requirements, separate from the down payment rules. A thin or damaged credit history can mean a higher insurance premium, a smaller approved amount, or a rejected application even if your down payment meets the minimum. If your credit needs work, improving it before you apply often saves more than shopping lenders after the fact.

FAQ: Bad Credit Loans in Canada

What interest rate will I pay with bad credit in Canada?
Expect 10.99% to 29.99% on a personal loan with poor credit (under 560), compared to 3.99%-6.99% with excellent credit (750+).

Are bad credit car loans more expensive than regular car loans?
Yes, and used car financing costs more than new car financing within any credit tier, since lenders price in higher depreciation and mechanical risk on used vehicles.

What is a high ratio mortgage?
Any mortgage with less than 20% down, requiring mandatory default insurance through CMHC or a private insurer, at roughly 4% of your mortgage balance for a 5% down payment.

Do I need a co-signer for a bad credit loan?
Often, yes, especially for car financing at the lowest credit tiers. A co-signer or larger down payment reduces the lender’s risk and can improve your approval odds and rate.

Can bad credit affect my mortgage even with the minimum down payment?
Yes. Mortgage default insurers set their own credit standards separate from the down payment rules, and poor credit can mean a higher premium or a rejected application.