People with good credit can apply for any type of loan, and their odds of approval are high. Banks prefer people with an excellent credit history. These individuals have a proven track record, which puts a lender’s mind at ease.
Although lenders are reluctant to approve applicants with a poor credit score, they are willing to accommodate bad credit applicants who apply for a home equity loan. Home equity loans for people with bad credit are available, and these loans have helped thousands of homeowners improve their finances. In most cases, the money acquired from a home equity loan is used for debt consolidation. And since these loans are collateral-based, lenders don’t require a high credit score. Still, it’s important to educate yourself on home equity loans. You’ve got to know their purpose, and understand the risks.
The money from a home equity loan can be used for multiple purposes. Common uses include debt consolidation, home improvement, retirement, business start-up, and college tuition. If used for debt consolidation, a bad credit home equity loan can improve a borrower’s low credit score, and help them qualify for better loan rates in the future.
2. Interest Rate:
Home equity loans typically feature a low fixed rate. For this reason, homeowners apply for loans in an effort to pay off their high interest credit cards. They can obtain a lower interest rate, and fixed terms afford them the opportunity to pay off the balance within a specific time frame. Unfortunately, home equity loans for people with bad credit don’t feature low rates. Borrowers with bad credit pay more for loans. However, the rate acquired on a bad credit home equity loan will likely be less than the interest rate on a credit card, which makes these loans a smart alternative.
2. The Risks:
Everyone recognizes how a home equity loan can improve their situation. But few borrowers acknowledge the risks. A home equity loan creates a new monthly expense, and borrowers must be in a position to repay the money. Individuals who apply for a loan and use the money to consolidate debt may not feel the pinch. In fact, these persons may actually save money. But if funds are used for another purpose, borrowers have to carefully assess their income and determine whether they can afford a new monthly expense.