subject: Home Equity Loan With Bad Credit - 3 Tips For Getting Approved [print this page] Home Equity Loan With Bad Credit - 3 Tips For Getting Approved
When a homeowner suddenly finds that they need access to cash to pay down bills, take a much-needed vacation, or made an addition to their home, talking to a home equity lender can be the right choice to get the cash they need.
If you want to qualify for a home equity loan with bad credit, here are 3 tips for getting approved for a loan fast and at the lowest-possible rate:
1. Decide whether you need an equity loan or an equity line of credit:
When considering home equity loan options, you actually have a lot to choose from. In general terms, you can either apply for an equity loan or an equity line of credit. The difference has to do with timing and how you get your loan funded. With a home equity loan, essentially you are applying for a loan that will be paid out to you in a single lump sum. You will have a set repayment period for the loan.
In the case of an equity line of credit on the other hand, you just borrow the amount you need when you need it. There is no need to borrow money all at once. Rather, you almost treat your line of credit like a bank account that you can borrow from. Of course, the more you borrow, the more you will owe in interest payments each month.
2. Check with your existing lender to see if a refinance of your first mortgage makes sense:
A third alternative for someone who wants to borrow cash using the equity in their home as collateral is to simply refinance your existing first mortgage. You can do so in a way whereby you are borrowing a large amount than what you owe on your current mortgage. And then, whatever money is left over (after paying off your existing mortgage), you can pocket - using it however you see fit.
3. Apply for a loan with at least 3 bad credit home equity lenders:
To apply for a home equity loan, of course you will need to verify that you indeed have equity in your home. That means, simply, that you owe less on your existing mortgage than the home is worth. Some lenders will only do an 80% LTV loan, meaning that they will lend no more than 80% of the value of your home (including whatever first mortgage principal you owe). Others offer 100% or even 125% LTV loans.
Given your bad credit score, you will want to be sure to apply for a loan with multiple bad credit home equity lenders. Doing so will improve your chances of getting approved with just the right interest rate.
Consider these 3 tips for getting approved for a home equity loan with bad credit.
