Getting a home equity loan is still possible if you have bad credit. These five tips will help you get the money you need quickly and efficiently.
Homeowners in need of a quick cash infusion are in a unique position. Even with bad credit, home equity loans are easily available. This is because the using your home as collateral against default on a home equity loan gives lenders added security. Therefore, those with poor credit scores, generally defined as anything under 600, are most likely to get the loan money they need through the home equity loan option. The following five tips will provide you with a solid foundation for getting home equity loan money fast and effectively.
TIP 1: Formulate a Plan
When you sit down to talk with a lender about getting a home equity loan, one of the first things he will ask you will be what you intend to do with the money. Though there are no specific reasons that will disqualify you from getting the loan you need, having a plan will show the lender that you are responsible and that you have thought through your options.
With bad credit, there are certain barriers that you will need to overcome. Part of the task you have is proving to the lender that you will be responsible with this home equity loan money. Therefore, choosing to take a loan to pay down credit card debt with a high interest or to pay medical bills would be two of the best and most responsible reasons to take out a home equity loan.
TIP 2: Know Your Limits
Equity is determined based on two factors: how much your home is worth and how much you currently owe on it. Depending on how long you have had your home, and therefore how much of the initial mortgage you have repaid, the amount of money that you can get through a home equity loan will vary. If you live in an area that has seen a drastic reduction in the market value of homes, you will be impacted as well. The only way to get a home equity loan is to owe less money than your home is worth. Therefore, you will need to have an appraisal done to determine your limits.
TIP 3: Pay Attention to Your Credit Score
Like I said before, a bad credit score is anything under 600. However, not all bad credit scores are created equal. The higher the score, obviously, the better, but also, the reasons for your bad credit will impact a lenders willingness to work with you. Make sure you understand why your credit score is low and take steps now to improve it over time. Also, make sure to get a copy of your current credit report to check for any discrepancies that could be bringing down your score.
TIP 4: Look in the Right Places
Though your home bank is a comfortable place to shop for a loan, having bad credit is a big barrier to getting what you want. In general, online lenders provide your best bet for getting a home equity loan despite having bad credit.
TIP 5: Shop Around
This is not to say that all online lenders are the same. Make sure that you shop around to at least three to five different online lenders. Talk to them about the packages that they offer and explain your bad credit. Home equity loan offers will vary between lenders and you can make sure that you are getting the best possible deal through comparison. Hopefully the five tips I offer here will help you get on track to finding the home equity loan you need.