Buying a home is one of the biggest debts we will ever have to take on. But one of the positives is that property will always have value. The chance to turn that value into cash when the wolves are at the door by accessing equity loans for bad credit makes the commitment to mortgage repayments so worthwhile.
But applicants need to qualify before they can get the green light. Even when equity on a home is substantial, lenders want assurances. There are some steps to take that, while not offering guaranteed loan approval, can greatly increase the chances of application success.
The range of benefits from an equity loan include practically every kind of outstanding debt. But while debt consolidation is the most common purpose, equity can also be tapped into for covering vacation expenses, buying a new car or financing home improvements.
Understand Your Credit Status
The first step to take to increase the chances of securing an equity loan for bad credit is to know exactly how the lender is going to see your application. This means taking a critical look at your financial status. The reason is that lenders would much rather know they are going to get the repayments every month than take over any collateral.
By checking out your credit report, a clear picture can be seen. If the status is poor, then it would be worth taking some time to improve the credit score before actually applying. True, there is no such thing as a guaranteed loan approval, but approval would at least be made more likely.
The main benefit, however, is that if low scores are improved the amount of interest charged will fall. This will make the loan more affordable. And since a saving of $100 per month an equity loan can translate to $12,000 over 10 years, it is certainly worth the effort.
Improving the Credit Score
Of course, to improve a credit score will take some time as well as effort. This is why it is all about getting the strategy right, even if the purpose of an equity loan for bad credit is to clear existing debts anyway.
The fact is that scores can improve even if some of the smaller loans are dealt with in advance. The quickest way is to take out a series of small personal loans, such $500 payday loans, to pay off minor existing debts quickly. Applicants are guaranteed loan approval for these kind of loans because usually no credit checks are carried out.
But the payday loans must be repaid in full after 30 days, which is where some careful budgeting comes in. These loans also have very high interest rates, so a $500 loan may mean $700 coming directly from a paycheck. Learning the full range of equity loan options first may prove more rewarding.
With a low score, there is no avoiding higher interest rates, but the key question is whether approval on an equity loan for bad credit can be secured in the first place. The advantage with approaching subprime lenders is that they are more likely to give the thumbs up.
This is because subprime lenders are specialists in calculating loan deals that suit bad credit borrowers, and in many respects are the closest thing to guaranteed loan approval. Their interest rates are higher, but because of the structure of repayments, their loans are more manageable.
With all of the benefits that an equity loan can bring, taking on repayments for 20 years rather than 10 years may be well worth it. After all, getting the outstanding debt cleared is the whole purpose of the exercise.
Article Source: http://EzineArticles.com/expert/Donna_N_Hammond/1178781