Home Equity Loans: Bad Credit Is Okay If You Can Answer These Four Questions



#1: How Much Equity Do You Have?

The equity of your home is determined based on two factors: your home's value and the current amount that you owe. As long as the money you owe on your current mortgage is less than your home's fair market value, you will be able to get a home equity loan. Therefore, you need to get an appraisal of your home before you move on in the lending process.

#2: What Is Your Credit Score?

FICO scores are calculated based on several factors. The most important of these is your asset to debt ratio. That is, how much do you own and how much do you owe lenders. The other important piece of information is your history of payments on current and former debts. Lenders want to see that you make your payments on time and that you are able to balance the number of bills you have each week with your income.

Your credit score will be somewhere between 300 and 800. The higher your score, the better you are for a lender. Generally, a credit score that is under 600 is considered a bad score, but many lenders will consider a bad credit score anything under 650. Make sure that you know exactly where you stand before you talk to any lenders about a home equity loan. Bad credit can be your fault, but it may be a result of misinformation. Review your complete credit report and discuss any discrepancies that you find with all three credit reporting agencies.

#3: Who Will Lend to You?

Many people automatically go to their personal bank any time that they need a loan. This is a great strategy for those with good credit, but those with bad credit are in a different position. Most traditional lending institutions - banks and credit unions - are not willing to take a risk on you if you have bad credit.

Home equity loans are frequently given to those with bad credit through online lenders, however. Therefore, your best bet is to look on the internet for private lenders who specialize in bad credit loans.

#4: Who Has the Best Deal?

Do not make the mistake of assuming anyone who will lend to you is giving you the best deal possible. Remember, lenders make money on the loans that they extend. In order to make sure that you are not being swindled, get a quote from at least three, or even up to five, different lenders. Do not be afraid to negotiate interest rates and other terms. Remember that as the customer you hold the power. The more lenders you can get willing to help you, the more leverage you will have to get the best deal possible on your home equity loan.

Bad Credit Will Not Stop You

Though there are special circumstances that surround borrowing with bad credit, home equity loans are still available through online lenders. Make sure that you answer these four questions and you will be on your way to getting the money you need.

Sarah Dinkins is a financial advisor who has been associated with Unsecured Personal Loans since long ago. She also holds a master degree in economics from Harvard University. To find home loans with bad credit and other financial products visit http://www.badcreditfinancialexperts.com.

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