Ben Todd | Jun 2, 2017 | 1
Home Equity Loans For People With Bad Credit”
Home equity loans are undoubtedly a great source of cash for homeowners. You can use your home’s equity for home improvements, vacations, new wardrobes, or whatever; it’s your money. It’s a simple form of liquidating an asset to give you cash on hand. Another smart move to use a home equity loan is to repay other debts. A home equity loan, or borrowing the difference between your home’s value against what is owed, can give you the money you need when you need it.
And if you’re credit score is considered good or better, it’s not too difficult to get a home equity loan. Simply apply at a bank or an online lender, jump through the paperwork hoops, and walk away with your cash. If you have poor credit, however, getting that loan can be a little more difficult. A credit score is a lender’s method of gauging whether you will repay a loan. The lower the credit score, the higher the risk for the lender. That’s not to say you won’t get a loan if your credit is poor; lenders will simply be a little more cautious about lending the money to you. However, home equity loans for people with bad credit are certainly possible.
You can help your case by asking to borrow less than the equity you have built up in your home. If you have $100,000 in equity in your home and ask to borrow only $20,000, the lender will view it as a sign of security. Default on your payments, and there’s more money available for the bank to use to recover its loss. Banks also are likely to balance their risk by charging you a higher interest rate than for someone with good credit. You’re also likely to pay higher closing costs if you have poor credit.
A lender might also insist that you use a cosigner if your credit score is less than ideal. That means that you’ll need to find someone with a better credit score willing to lend their promise that the debt will be repaid. The cosigner will assume the debt if you default. Usually, people seek the help of a parent or friend as a cosigner. It’s another way that a bank will ensure that its risk is covered, and so long as you repay the debt as promised, everyone benefits. Bad credit home equity loans (or home equity loans for people with bad credit) are out there; just know what to expect before you appply.