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Bad credit loan needed? - Canada Bad credit? Need a loan?

There are many thousands of Canadians who have bad credit and are looking for a "bad credit" loan from their credit cards or from other creditors.

I thought I would write about this from a business accounting stand point, to help people understand what is a bad credit loan.

A business looks for sources of cash for their operations and development from the following sources:

1. Cash Flow - Profit from operations
   
2. Loans and lines of credit from banks and other lenders
   
3. Selling shares to shareholders
   
4. Sale of assets

Fundamentally, these are the four sources of cash income for a business.

A household is quite the same in that it has 3 of these same sources of income to keep the household operations running.

1. Income from a job or small business
   
2. Loans and lines of credit from banks and other lenders
   
3. Sale of assets

These are what brings cash into the house to buy things.

Bad credit loans for consumers - A household balance sheet problem.

Usually when a household is looking for a bad credit loan they are usually in trouble. Their debt situation is in rough shape, and they are looking for credit to pay the bills.

WHAT THIS MEANS:

• The household has used up all of its credit available


• The income from jobs and small business is not enough to cover bills


• There aren't many assets to sell to raise cash.

For some reason the expenditures are more than the income available and the household is now looking for cash to keep up bill payments.

The household goes from this at the beginning:
Income: $65,000/ year from both spouses
Small Mortgage: $85,000 owing on their starter home
One car line of credit: $15,000 for that starter vehicle.
Credit available: $10,000 ( $1,000 owing ) on three credit cards
Savings Account: $5,000

to this a few years later:
Income: $100,000/ year from both spouses
Larger Mortgage: $225,000 owing on the preferred home
Two car loans: $40,000 on more luxury vehicles
Credit available: $25,000 ($15,000 owing ) on lines of credit
Credit available: $20,000 ($10,000 owing ) on credit cards
Cash Savings: $10,000

This is usually the progression. As people get older, they make more money at their jobs and as they accrue more and more job security, they feel safe to take on more and more debt responsibilities.

If you make $100,000 per year and have the bad credit debts listed above, you're probably in good shape. You've got enough income to easily cover your debts.

HERE'S WHERE THE PROBLEM STARTS
Problem #1: Your company may lay you off or fire you.
Jobs are as secure as the companies you are working for. Your income is only secure for as long as the company needs you and or can afford you. You may get fired and need a bad credit loan then

Problem #2: You or a loved one gets sick or disabled
A person can get sick or injured unexpectedly and have to leave their job. This could be for a short term or long term, but it creates an interruption in the households cash income. unemployment insurance

SCENARIO: One spouse who makes half the income gets laid off. It could affect the credit report and fico score then.

Your situation goes to this:
Income: $50,000/ year from both spouses
Larger Mortgage: $225,000 owing on the preferred home
Two carloans: $40,000 on more luxury vehicles
Credit available: $25,000 ($15,000 owing ) on lines of credit
Credit available: $20,000 ($10,000 owing ) on credit cards
Cash Savings: $10,000

All of a sudden your cash income has dropped in half, but your bill payments have stayed the same!!

In this scenario, the house hold would quickly use up their $10,000 in savings to cover their debts and living expenses, and then they may start having trouble covering their bills.

Their debts might go unpaid for a few months. That is when they start to develop bad credit.

All of a sudden, in desperation this household starts to look for additional income to pay their bills to keep the debt collectors from calling.

This is the start of this household looking for a bad credit loan !
They've got damaged credit and they're looking for a loan to cover their current debt payments and their expenses.

The problems may get worse as the stress of the situation disables the other income earner and they are forced to take time off as well. It creates default items on your equifax and transunion credit report.

As stated above:

• The household has used up all of its credit available
  
• The income from jobs and small business is not enough to cover bills
  
• There aren't many assets to sell to raise cash.

It's really hard to plan for the unexpected. Canadians do get in trouble and are forced to look for a bad credit loan Canada

The purpose of this post was to illustrate in a little greater detail how many thousands of households start off with dreams of a good lifestyle. As their lives and situations develop things sometimes tend to go off course causing them to derail credit wise.

If you're looking for a bad credit loan, don't feel bad... there are many thousands of Canadians who are in the same boat. Looking for a bad credit mastercard to help them keep afloat, and get them back on track..

Tags:
Bad credit loan Canada
Canadians Looking for a bad credit loan

Article Created: 2007-12-07
Article Updated: 2009-05-28