Even if you are in a time of great financial hardship (and millions of Americans are), it’s good to know that home ownership still counts for something in today’s crazy financial times. One way that your home can work for you is to get one of the home equity loans that are available for people with bad credit.
What Home Equity Loans can you Get with Bad Credit
Yes, you can still use your home to get access to the cash that you need, even if you have a poor credit rating. However, you should proceed with caution when seeking such a loan. Many of them have horrible terms that will keep you in debt far longer than you want to be.
With that in mind, here are some pointers on grabbing a home equity loan for bad credit.
Calculate what loan amount you can afford
This is a crucial first step, and you might want to restrain the optimism that you usually have about such matters. That might have been what got you in your current mess! Consider carefully how much you need to borrow and how much you can pay back at a time. Do NOT let a lender talk you into a bad credit loan that is larger than you need. This happens frequently, and the borrower is always the loser. Go into any negotiations for a home equity loan with a set amount that you know that you can afford to pay back each month.
Calculate your home equity
Subtract your mortgage balance and liens from the market value of your home, and you will have the amount of equity that you can borrow against. Remember that borrowers with outstanding credit can often get up to 80% of their equity, but those with bad credit will not be able to borrow that much. Go into negotiations with reasonable expectations.
Compare bad credit offers
There are all sorts of home equity loans on the market. Compare rates, terms and other factors as you shop for a loan. Check for prepayment penalties, balloon payments and other goodies that can make a deal rotten. Get plenty of quotes and ask for estimates on the closing costs. Check references and inquire of the Better Business Bureau regarding the candidates for your business. Add it all together and pick the fairest lender.
If you are able to snag a home equity loan, take assurance in the fact that you will be rebuilding your score as you make your payments on time. If you do not have confidence that you are able to sustain a monthly payment at this time, don’t risk even the sweetest home equity loan terms. If you can’t make your payments, you could lose your house – in all likelihood your most valuable asset.