Guide: How to Get a Home Equity Loan with Bad Credit
At some point in your life, you may face a time when you need to cover the cost of a major expense due to a life event or unforeseen occurrence.
Incidences such as needing to pay your child’s college tuition, making major home repairs or purchasing a new vehicle may force you to contemplate taking out a loan in order to come up with the extra cash.
While there are a number of different types of loans to consider, if you are a longtime homeowner, you may want to look at your options for a home equity loan or second mortgage.
In general terms, a home equity loan is a loan for a predetermined amount of money that is protected by your home, according to the Federal Trade Commission.
Those who take out a home equity loan are required to repay the loan with monthly payments over a set period of time, similar to your original mortgage.
It’s important to note that if you fail to repay the loan per the agreed-upon terms, your lender can foreclose on your home.
Image source: Bigstock
While this type of loan may seem like a suitable option when the need arises, there are many factors to think about before moving forward. For example, what if you want a home equity loan with bad credit?
While owning a home and keeping up on your payments is a great way to build credit, there could be a number of reasons why you may have bad credit.
If you miss certain payments thinking your spouse has already made the payments, have trouble keeping your bills organized or don’t make enough money to cover all of your expenses, you may fall victim to bad credit.
If any of these or similar situations apply to you, read on, as this article will address what to do if you want a home equity loan with bad credit as well as answer the following questions:
- What comes up when you search “bad credit home equity loan?”
- Are there home equity loans for bad credit?
- Are home equity loans with bad credit possible?
- Can you get a home equity loan with bad credit?
In addition, AdvisoryHQ will address how to get a home equity loan with bad credit by examining the entire application process and how it works if you do have bad credit. Through an analysis of this topic, we’ll review the following scenarios:
- When you have bad credit and home equity loan lenders don’t help you
- Applying for a home equity line of credit with bad credit
- Switching a home equity line of credit for bad credit
Interpreting Your Search Results
Since there is so much information available on the Internet today about this topic, we want to help you decipher what is most reliable and what may steer you in the wrong direction.
If you have just begun researching how to get a home equity loan with bad credit, you may have started by conducting a search using the phrase “bad credit home equity loan.” Searching this phrase provides a variety of different results, including the following:
- Advertisements for home equity lending companies
- Articles on applying for home equity loans with bad credit
- Other types of equity loans with bad credit
While all these resources are helpful, it’s important to determine exactly what type of information you are looking for and what you need to know.
For example, when you search “bad credit home equity loan” and see the first several results come up with the word “ad” in a green box, you know these are paid search results.
These paid search results are an indication that the company to which the link points has paid to be placed in the results for the search “bad credit home equity loan.”
It is likely that if the company paid to come up within the first several results of the search “bad credit home equity loan,” it is trying to target you so that it can sell you its services.
All-in-One Change Management Tools
Top Rated Toolkit for Change Managers.
Get Your Change Management Tool Today...
The most common lending companies that may come up in the paid search results when you search “bad credit home equity loan” include Specialty Lending Group, Lending Tree, and Navy Federal Credit Union, among others. While some may offer good advice through articles or blog posts by the company’s professionals, others may simply try to sell you their services through advertised discounts and special rates.
For this reason, it is important to look at all search results when you search for “bad credit home equity loan,” including those beyond the first several results. The search phrase “bad credit home equity loan” may produce many pages of results, so hone in on the first one or two pages to carefully examine your different options.
While conducting your research for “bad credit home equity loan,” make sure to read the scholarly articles on the topic, review information shared by bad credit home equity loan lenders, and compare all rates offered by the top lenders.
Home Equity Loans for Bad Credit
If you have bad credit but desperately need a home equity loan, you may be pondering whether home equity loans for bad credit even exist and whether you have the option to apply. Fortunately, if you’ve started your online search of “bad credit home equity loan,” you’ve seen that there are, in fact, options for home equity loans for bad credit.
Various lenders do offer home equity loans for bad credit, but with certain conditions and the requirement to meet specific qualifications. Since the home equity loan enables homeowners to use their home as collateral, the loan can provide greater approval and lower interest rates than other equity loans with bad credit.
Homeowners with high amounts of equity in their homes are at a greater advantage and may have a better chance of getting home equity loans for bad credit.
So what are the requirements for home equity loans for bad credit? First, you need to obtain a copy of your credit report in order to identify your credit score and determine the severity of your situation.
Next, you must compile your financial information to present to your lender. The information your home equity loan lender may request for home equity loans for bad credit includes proof of income, any investments, and the current amount of equity in your home.
If you are looking for home equity loans for bad credit, it is recommended to apply with at least three different lenders, according to an article on SFGate.com. Applying with multiple lenders will enable you to compare terms and interest rates in order to find the best deal.
Can You Get a Home Equity Loan with Bad Credit?
By now, you should understand that the answer to this question is “yes.” In fact, homeowners with bad credit can actually obtain loans that consolidate debt and possibly even increase their credit scores, according to LendingTree.com.
A home equity loan with bad credit can be utilized to make improvements or upgrades on your home and provide rates that are easier to manage than those on personal loans.
When asking the question, “Can you get a home equity loan with bad credit?” however, you do need to realize that borrowers who secure a home equity loan with bad credit typically pay higher interest rates than people with good credit. In addition, homeowners who are interested in obtaining a home equity loan with bad credit must already have a substantial amount of equity in their home.
Bad Credit Home Equity Loan Lenders
Now that you’ve learned about how to get a home equity loan with bad credit, it’s important to know your options in case you’re in the scenario that you have bad credit, home equity loan lenders won’t help you, and you need to find more resources.
Image source: Inlanta Mortgage
According to Debt.org, when you have bad credit, home equity loan lenders, banks, and other lending institutions consider you a “high-risk customer.” If lenders are uncertain about whether you’re able to repay the loan, they may not work with you. In addition, when applying for a home equity line of credit with bad credit, bad credit home equity loan lenders will impose stricter standards, regulations, and controls.
When seeking a home equity line of credit with bad credit, make sure you consider all your options, including those outside of bad credit home equity lenders. For example, other equity loans with bad credit include those from a community-based credit union or one that is associated with your employer. These types of institutions may work with you depending on your financial standing.
Another option is to have a friend or family member with good credit cosign for a loan. While this may seem like an easier option than sifting through bad credit home equity lenders, it may take some convincing that you are trustworthy enough to keep up on equity loans with bad credit. If you miss payments or do not pay back your debt, the person who cosigned will be responsible for your debt, which will hurt both your cosigner’s and your credit score.
Conversely, certain bad credit home equity loan lenders are willing to work with people who are interested in home equity loans with bad credit. If you own a home and have a substantial amount of equity in it, you can apply for a home equity line of credit with bad credit.
If you qualify, bad credit home equity loan lenders will help you secure a tax-deductible home equity line of credit for bad credit at a sensible interest rate with few restrictions, according to GoBankingRates.com. It’s important to note, however, that there are certain limitations on claiming your line of credit as a tax deduction.
In summary, obtaining a home equity line of credit for bad credit is possible with the right resources and support. While this guide provides some options, it’s important that you conduct adequate research and consider all factors before applying for a home equity loan with bad credit.
Again, one of the first and most important steps in applying for home equity loans f0r bad credit is obtaining a copy of your credit report so you know where you stand and can start making the appropriate changes to improve your score.
The reason is that even if you do quality for equity loans with bad credit, you will likely face much higher interest rates, sending you into a cycle of debt and stress. Working to improve your credit score by making wise credit decisions and developing healthy credit habits involves paying your bills on time, using your credit cards responsibly, and avoiding delinquencies and collections.
The result of good credit is better opportunities to obtain the assets you’re seeking for a secure future, including a home, a car, a loan or education. Since most lenders, landlords, and other service providers check your credit before accepting your application, it’s important to know your standing, learn when it changes, and manage your credit properly. It may take time, but improving your credit and establishing good spending habits will produce lifelong benefits.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.