Getting A Bad Credit Home Equity LoanA bad credit home equity loan is available for many people. The fact is, home equity loans are backed by your home's value, which makes these loans more affordable than unsecured debts like credit cards. For those individuals who need help getting out of debt or those who need to consolidate other debts, these home equity loans can be the ideal route to take to accomplish just that. Having bad credit does hurt your ability to get this type of help, but there are some lenders that do specialize in these loans.
Why You May Qualify Individuals who are homeowners may qualify for a home equity loan. This type of loan is a loan based on the un-mortgaged value of your home. If you are carrying a mortgage on your home, the equity you have in the home is the home's value minus any mortgage amount. For example, if your home is valued at $250,000 and you are carrying a mortgage with a balance of $200,000, you have potentially $50,000 worth of equity in your home. The amount of money you have in your home is difficult to determine on your own, though. You will need to determine what the actual value of your home is. The only approved method for doing so is to have an appraisal done (usually done by the mortgage company you will get the equity loan through.) If you have equity, you have qualified, almost, for this loan.
Your credit does play a role in if you can obtain a home equity loan. If you have poor credit or no credit at all, it will be much more difficult to obtain this type of loan. You will need to prove to the mortgage company that you can make your monthly payment for the equity loan. This is a payment on top of your current mortgage. The only way that the lender will provide you with a loan is if you are working on improving your credit. Here are some ways you can fix your credit history to become a better candidate for a home equity loan.
Check your credit report and have any mistaken or old information (older than 7 years) removed from your credit report by filing a claim with the credit bureau. Once you know your credit history is accurate, you can count on it getting better. Make sure you do not have any debts that are in collection. A collection is a claim against you that is being collected by a debt collection company. At this point, the original lender of the funds is no longer claiming the funds and that is a bad sign for any home equity lender of the risk you are to them.
Stay up to date on your mortgage. One of the worst mistakes you can make is to fall behind on your mortgage. If you have, a home equity lender will realize that you may fall behind on the loans you have with them, and therefore will not approve a loan for you.Keep your credit cards under their limits and make payments on time. Even if you have a sizable amount of debt, it is better if you show you are managing it well. Make payments on time. Be sure that you work hard on paying down this debt as much as possible.
Don’t take on new debts. If you apply for several credit cards and work up your credit limits again, this too shows that you are irresponsible with money and therefore a poor credit risk. It also makes you look desperate to the lender, which is a red flag for them, too.Even if you do have bad credit, home equity loans are available to individuals who are working on improving their loan. Those who have filed bankruptcy in the past may be qualified to get a home equity loan 2 years after they have filed. If you have lost a home to foreclosure and are in a
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