subject: The Advantages of a Home Equity Loan After Bankruptcy [print this page] The Advantages of a Home Equity Loan After Bankruptcy
Bankruptcy has seen a huge increase over the past few years, mainly due to the economic downturn that has made businesses close and employees redundant, leaving many with no means to obtain the money they need to honor debts with their various creditors. Whilst bankruptcy may solve any problems in the short term by nullifying these debts, what is the person to do in the long term? There will still be no money and therefore no way to start another business or pay off other bills that will still come in, such as those for household amenities like electricity and water. A home equity loan could be a great option for anyone with equity on their property, as it will provide a bulk of money at a time when it is needed most.
A home equity loan is essentially a loan that is taken out against the value of what you own of your property. This means that should a property be worth $100,000 and half has been paid off, the prospective client can borrow $50,000 as the lender knows they are able to get the money back should there be a failure to keep up the repayments. Whilst this prospect may sound scary, surely it is more concerning to not have any money and risk losing the home anyway?
Those who have gone through bankruptcy won't have an easy ride, though, when obtaining a home equity loan, although it is still far from impossible. Because their credit rating will be poor, there is the unfortunate possibility that they will end up paying much higher rates of interest on their loan than someone with a good credit history would. However, shopping around for the best deal will yield some great bargains, as each lending company looks to be cheaper than the last. Never rush in to a deal - not looking around could cost you thousands of dollars in interest if you fail to find the best provider.
There is also, of course, the option to get a home equity loan as an alternative to going bankrupt, which many people see as a very realistic option. There are various advantages to this, with the main one being that there won't be a marker on your credit history saying you have a poor financial history. This means that the interest rates should be lower and therefore more of the borrowed money will be available to be spent. The disadvantage, however, is that there is still uncertainty as to what direction your financial situation is heading. Should you manage to claw your way back from the brink of bankruptcy, there will still be the monthly repayments from the home equity loan hanging over you. Many people prefer to take their chances and see if they can rescue their finances without this loan.
In conclusion, a home equity loan is great for those that need a boost in their finances after bankruptcy. This is because it will allow them the option to rebuild their life from the ground up, something that might not be possible without this financial injection.
