Although a consumer may have poor/bad or less-than-perfect credit, they may be able to take out a Home Equity Loan. The equity a consumer has in their home/property is simply the difference between what the consumer owes and what the home/property is valued at. A Home Equity Loan provides an avenue for consumers to borrow money based on that amount. The amount of a consumer’s equity is not based on what they paid for their home or on their credit score, but it is based on what the house is worth. As an example to help consumers understand how equity calculations work, it is merely a simple calculation — Say a consumer bought their home for $150,000 and have a mortgage for $120,000, that gives the consumer $30,000 in equity.
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General Overview for Bad Credit Home Equity Loans
The amount a consumer can actually borrow against the established equity certainly varies from one lender to the next lender. It is also determined by the type of home equity loan a consumer may apply for.
Common Home Equity Loans are:
• 125 Home Equity Loans
• Refinance Home Equity Loans
• Second Mortgages
• Home Equity Lines of Credit (HELOC)
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About Bad Credit Home Equity Loans
Should a consumer have bad credit, the interest rate they will pay on their home equity loan will be higher. The consumer’s credit score is determined by some rather extraordinary criteria. In addition to the usual criteria a consumer might expect, like income, past payment history as well as total debt, it also includes criteria as to a consumer’s education level, work history, and how recently the consumer may have moved. Should the consumer have a bad credit score, they may wish to consider repairing their credit history prior to applying for a new loan.
Home Equity Loans can be a great strategy to pay of other higher-interest debt such as credit cards or auto loans. The annual percentage rate (APR), generally on Home Equity Loans is much lower than other consumer debt. Consumers should beware that their home is collateral for the loan; therefore, if the consumer defaults on payments, the consumer could lose their home.
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