There are many reasons in life that'll make you turn to credit. Loss of a job, medical expenses, even paying for your kid's college expenses -- and a Home Equity Line of Credit may be the right option for you. But before you cll your broker and sign away your home, you should weigh up the costs of a home equity line of credit against the benefits.
It almost goes without saying that you should shop around for the home equity line of credit that best meets your requirements without imposing undue strain and risk. Remember, your home goes up as collateral against a home equity line of credit, so if you fail to make your repayments, your home is on the line.
So what exactly is a home equity line of credit? As stated above, it's a line of revolving credit that uses your home as collateral. Because your home is probably your most valuable asset (and it IS your home, after all), you should think carefully about why you want to take out this loan. Usually, because of the risks involved, homeowners only use home equity loans for larger expenses, not for day-to-day expenses. If you are approved for a Home Equity Line of credit, your lender will take a percentage of your home's appraised market value and subtract any mortgage payments owed to give you your credit limit. So for a house worth $100,000 at a lender's rate of 80% with $40,000 payed off the mortgage principle (so that'd be $60,000 still owed) you'll be given a credit limit of $20,000 (or 80% of $100,000 less $60,000). Of course other factors come into play, such as your credit history and your ability to repay the loan.
What to look out for when applying for a Home Equity Line of Credit
Just like a mortgage or bank loan, many Home Equity Line of Credit lenders will set a time limit to repay the loan or set a time to borrow credit. At the end of this period you might be able to take out another line of credit -- this will depend on the lender, so it's worthwhile finding this out before you sign on the line. And depending on who you borrow from, you may have to repay in full the amount you've borrowed. Make sure you know what you're dealing with BEFORE you sign up.
So, once you're approved, your Home Equity Line of Credit acts just like one great big huge credit card (only with your home as collateral). If your lender allows your Line of Credit a 10 year term, then you can borrow up to your credit limit whenever you want during this time. Look out for lenders who facilitate access to this line of credit by tying it into a credit card -- this makes access a whole bunch easier (but the temptation to use it a whole lot higher).
You should also whatch out for any limits on withdrawal. For instance some loans may require you to draw a minimum each time you need credit. Or you may be required to keep so many dollars outstanding balance. Or take out an advance upon approval.
Keep an eye out for these things. They'll vary from lender to lender and they may not fit your requirements.
Time to go shopping
So you've decided that you still want a home equity line of credit? What next? Shop around for the best plan! Ask the lenders questions. Give them worst case scenarios. Find out what they'll do and what you have to do. Remember, your home is at stake if you fail to repay the debt. There may be appraisal fees, application fees and closing costs and then, of course, there will be the interest rate applied to the loan.
Home equity lines of credit will usually involve a variable interest rate rather than a fixed. This rate will be based upon a reputable, well publicised and publicly available source such as a prime rate index in a national newspaper. It's important to remember that interest rates can go UP and down. The interest rate stated for the loan will most likely be the interest rate on the day you apply with a margin to allow for this fluctuation. Don't be fooled by this margin -- it will be a 'most-likely' scenario -- make sure you know what the source of the interest rates are and what their historical fluctuation is. If historically, your index reaches high rates frequently this will reflect on your repayments and you may find it difficult to repay your loan. However, home equity lines of credit will be capped to a maximum rate (and most likely a minimum rate too)
You may find that your lender will also give you an introductory rate to your home equity line of credit.Make sure you know how long the introductory rate lasts and what the rate will increase to. You may save a few bucks here, but you don't want to be surprised in 6 months time when the introductory rate expires. Also look out for any 'membership fees' or maintenance fees (that'd be annual charges to you and I) and any transaction fees. Do the math here. You may find it more beneficial to have a home equity line of credit with a slightly higher interest rate and lower fees than a low rate loan with high fees. This will really depend on how you intend to use the loan.
The Crunch
With some home equity line of credit plans, your monthly payment may not be enough to cover the interest and principle. In fact some are interest only payments which will leave the principle untouched. So if you take out a home interest line of credit for $10,000 you may find yourself owing some or all of that once the plan ends! Given this situation, you'll be required to make one final payment to close the loan. As you can see, this payment could be quite a significant sum. This kind of large last payment is referred to as a balloon payment. Don't be caught out with this. Typically people will have to refinance to meet this payment.
You'll also most likely not be able to rent your home during the term of the Home Equity Line of Credit plan. And if you sell, you'll most likely have to repay the entirety of balance then and there.
The most important thing to consider with a home equity line of credit is not "How much do I need?" but "How much can I repay?". If you misjudge this most important question you may well find yourself in a spiral of ever accumulating debt -- or you may lose your home. It sounds very bleak and very complex, but rest assured that Home Equity Lines of Credit can serve you well.
Beware 'Bad Credit OK!' scam Home Equity Loan
So you're considering taking out a Home Equity Loan but you have a problem with your credit. Normally, a bad credit score inhibits the availability of credit. The thought is quite simply that if you have bad credit, you're unlikely to be able to pay back the loan. So, lenders won't touch you with a proverbial barge pole (let a lone a real barge pole).
And, to be fair, if you had a friend who you know had no income and a history of never paying anyone back who lent him money, you'd be wary of lending him money as well. Sure, if it was a life or death situation, you'd probably not think about it, but if it was because he wanted a new motorcycle I'm sure you'd think twice before parting with your own green.
Now, what if this imaginary friend of yours said to you "I know I'm a lousy risk for a loan but I'll sign my house over to you, so that if I don't pay back this loan within a couple of years you can sell my house and keep whatever you make from it"?
I'm sure you'd start listening a bit more intently. And you'd be doing a bit of math in your head. A motorcycle is worth what? $10,000? A house is worth $100,000? Mmmmm.
But that's not the kicker. If we were going to be unscrupulous to our imaginary friend then we'd offer him the $10,000 right then and there. Why did I say this was unscrupulous? Because we know that he's got a track record of not paying debt back. We also know he's not making a lot of money and he's going to find it difficult to repay us. In otherwords, the likelihood of him defaulting on this loan is quite high.
And if he defaults, that means our $10,000 loan has just turned into a $100,000 home.
Not bad for a few minutes thinking.
That's the kicker, right there. The "Bad Credit OK" label might seem like an altruistic sign from above, but it's not. It's quite the opposite. These guys aren't looking at helping anyone out, they're looking at finding people who are incapable of repaying a loan (which is already being paid back at high interest rates) so they can acquire the much more valuable collateral (the house).
It's a no-brainer for the lender. They either get the interest on the home equity loan or they get the home itself. And by preying on those with bad credit they can make even more from charging higher interest rates and significantly increase the chances of getting the proffits from selling the home itself.
So buyer (or borrower) beware. If my imaginary friend wanted to borrow money, I might lend it to him but I'd know I'd likely not get it back. I certainly wouldn't want him to do something as silly as sign his house over to me. That'd just be wrong, wouldn't it?
And, to be fair, if you had a friend who you know had no income and a history of never paying anyone back who lent him money, you'd be wary of lending him money as well. Sure, if it was a life or death situation, you'd probably not think about it, but if it was because he wanted a new motorcycle I'm sure you'd think twice before parting with your own green.
Now, what if this imaginary friend of yours said to you "I know I'm a lousy risk for a loan but I'll sign my house over to you, so that if I don't pay back this loan within a couple of years you can sell my house and keep whatever you make from it"?
I'm sure you'd start listening a bit more intently. And you'd be doing a bit of math in your head. A motorcycle is worth what? $10,000? A house is worth $100,000? Mmmmm.
But that's not the kicker. If we were going to be unscrupulous to our imaginary friend then we'd offer him the $10,000 right then and there. Why did I say this was unscrupulous? Because we know that he's got a track record of not paying debt back. We also know he's not making a lot of money and he's going to find it difficult to repay us. In otherwords, the likelihood of him defaulting on this loan is quite high.
And if he defaults, that means our $10,000 loan has just turned into a $100,000 home.
Not bad for a few minutes thinking.
That's the kicker, right there. The "Bad Credit OK" label might seem like an altruistic sign from above, but it's not. It's quite the opposite. These guys aren't looking at helping anyone out, they're looking at finding people who are incapable of repaying a loan (which is already being paid back at high interest rates) so they can acquire the much more valuable collateral (the house).
It's a no-brainer for the lender. They either get the interest on the home equity loan or they get the home itself. And by preying on those with bad credit they can make even more from charging higher interest rates and significantly increase the chances of getting the proffits from selling the home itself.
So buyer (or borrower) beware. If my imaginary friend wanted to borrow money, I might lend it to him but I'd know I'd likely not get it back. I certainly wouldn't want him to do something as silly as sign his house over to me. That'd just be wrong, wouldn't it?
Tax, Debt and Home Equity Loans
In 1986 things changed. Hairstyles, clothing, music styles and tax law. You may not have been around in the 80's but I was. In fact I was in England at that time and it was the end of the Thatcher "golden era" and the BOOM! had gone BUST! Home prices had plummeted, inflation was high, home-owners had over-borrowed and no-one could keep up on their home payments. It was a bad time and the silly clothes and the silly hairstyles just weren't appropriate any more.
So, here we are in the 21st Century and we're finding similar things happening within the home-owning sector again with home-owners finding it difficult to repay their loans or getting into credit difficulties. At least this time the hairstyles aren't so ridiculous. And the tax laws are in place to help those with less-than-good-credit.
With those changes in the law it can now be beneficial to use a Home Equity Loan to change your 'Bad Debt' into 'Good Debt'. That is, for example, to pay-off an auto loan by using a Home Equity Loan. For a start, the interest rates on a Home Equity Loan is going to be lower than that on an auto loan or a credit card. And that will most likely mean your monthly repayments are going to be lower. And that, in turn, means your repayments willl be easier to reach and maybe exceed. And, if you pay more than your minimum repayment, you'll find that your credit score will improve!
So far it's a win-win for the Home Equity Loan and nairy a bad hairstyle in sight!
Now, back onto the tax law. For loans up to $100,000 you can deduct the interest. In terms of the example above, where you use your Home Equity Loan to repay an auto loan, you'll find that not only are you saving money on your interest rates, but you'll get a further saving by deducting the interest. Kinda makes you wonder why you even bother with credit cards, right?
Well, it's not all a bed of roses. Too many people don't understand all the applicable tax laws when it comes Home Equity Loans. That's why there are people out there who make a lot of money sorting out the mess that us-every-day-people get into.
I was planning on writing a lengthy and complicated article on Home Equity Loans and the tax implications thereof but it would really be a disservice to anyone reading. Tax laws vary from state to state and what might be applicable to my Home Equity Loan, might not be applicable to you.
So, here's the best advie I can give you. Talk to a tax specialist. It may cost you a few bucks, but in the long-run it could save you, your credit score and, more importantly, your home!
So, here we are in the 21st Century and we're finding similar things happening within the home-owning sector again with home-owners finding it difficult to repay their loans or getting into credit difficulties. At least this time the hairstyles aren't so ridiculous. And the tax laws are in place to help those with less-than-good-credit.
With those changes in the law it can now be beneficial to use a Home Equity Loan to change your 'Bad Debt' into 'Good Debt'. That is, for example, to pay-off an auto loan by using a Home Equity Loan. For a start, the interest rates on a Home Equity Loan is going to be lower than that on an auto loan or a credit card. And that will most likely mean your monthly repayments are going to be lower. And that, in turn, means your repayments willl be easier to reach and maybe exceed. And, if you pay more than your minimum repayment, you'll find that your credit score will improve!
So far it's a win-win for the Home Equity Loan and nairy a bad hairstyle in sight!
Now, back onto the tax law. For loans up to $100,000 you can deduct the interest. In terms of the example above, where you use your Home Equity Loan to repay an auto loan, you'll find that not only are you saving money on your interest rates, but you'll get a further saving by deducting the interest. Kinda makes you wonder why you even bother with credit cards, right?
Well, it's not all a bed of roses. Too many people don't understand all the applicable tax laws when it comes Home Equity Loans. That's why there are people out there who make a lot of money sorting out the mess that us-every-day-people get into.
I was planning on writing a lengthy and complicated article on Home Equity Loans and the tax implications thereof but it would really be a disservice to anyone reading. Tax laws vary from state to state and what might be applicable to my Home Equity Loan, might not be applicable to you.
So, here's the best advie I can give you. Talk to a tax specialist. It may cost you a few bucks, but in the long-run it could save you, your credit score and, more importantly, your home!
Home Equity Loan or Line of Credit?
A Home Equity Loan allows you to use your home as collateral against a a loan. The value of the loan is determined by the equity in your home and consists of whatever money you may have invested in your property in order to own it (eg mortgage payments, down-payment etc) or money you may have invested in your home to improve it (e.g. refurbished kitchen etc.)
A home equity loan comes in two forms either as a tax-deductible lump sum or as a revolving line of credit and as either a fixed or adjustable rate loan.
Home equity as a source of a line of credit (HELOC)
If you need money you can apply for a Home Equity Line of Credit (HELOC). It will give you a large amount of money with a low interest rate. Compare this to what you might see on your credit card statement. With a home equity Line of Credit you will tender your house as collateral against the loan. Obviously if you default on your loan repayments you put your home at risk.
Beware of loans with balloon payments -- where you pay a larger than normal final payment. If you're finding it tough to pay the normal loan repayments, this final inflated payment may well see you looking at taking out a further loan to pay it off.
Also watch out for any financial penalties when you take out a Home Equity Line of Credit such as closing fees. Closing fees should be refunded, along with any other fees associated with opening the loan. Make sure you shop around as saving a quarter of a percent will save you a great deal of money in the future. So make sure you talk with your lender. Outline worst case scenarios so you understand what might happen.
Home Equity as a loan (HEL)
A Home Equity Loan (HEL) becomes a lien against your home. As the loan is secured against your home, a home equity loan lender may sell your home if the creditor wants the money back that you borrowed.
Home Equity Loans give you a large tax-deductible lump sum of money. Generally, you'll be able to borrow more at a single time with a Home Equity Loan compared to a Home Equity Line of Credit.
Shop around and get the best deal possible. Talk with your lender about different scenarios.
Final thoughts: Only borrow as much as you need. Often people take out home equity loans to rid themselves of bad debt. It's often tempting to ask the lender for a bit more than you actually need. Avoid this if possible. The aim, in the case of eliminating bad debt, is to lower monthly repayments and to get your credit under control as quickly as possible. Resist the temptation and only borrow as much as you need.
Bad Debt? Can't I have Good Debt?
Credit is easy to get today. Too easy. How much junk mail do you get every week which is an offer from one credit company or another offering you the chance to go further into debt?
It used to be that credit companies would only look at good risk customers. They wanted to make sure that the loans could be repaid. But then, it used to be that cars couldn't travel faster than 30mph and you'd still have change from a twenty after a good night out. Things have changed.
Now, anyone will loan you money whether you have good credit or bad.It's the debt cycle that these loan companies love. If you find yourself in the debt spiral all you cn do is get even further into debt. And people wonder why America is in the trouble it's in?
It's no secret that debt is a complex subject. We all have it. We all hate it. We're all tempted to have more of it. But is more good or bad when it comes to debt?
Some credit is good. But before you rush out and start spending your yet to be earnt cash you need to know what debt is good. A mortgage is a good loan, for instance, whereas a credit card is bad credit! A business loan is good, but a car loan not.
So how do you know what's good debt and bad debt. Well, the experts have a very simple rule of thumb and it's as follows:
Assuming you had to take a loan out to buy something then:
If, as soon as you buy it, it depreciates in value, then that'd be a bad debt loan
and conversely:
If what you buy has a chance to appreciate in value, then that would be a good debt loan.
So, a few examples. You see that Camero in the car sales forecourt and it's just screaming your name. You're sold before you even enter the showroom. No need to test drive it, you just need to know where to sign. $50,000 fine American dollars later, you drive it out of the showroom and onto the tarmac and instantly the car is worth $20,000 less than when you signed. That'd be bad debt.
So you're driving home and you see a lovely 4-bedroom home for sale which would make a great family home. You pull your Camero into the drive and you're lucky enough to find the realtor visiting. What luck! A few signatures later you've just bought a $300,000 home on credit.
After a couple of months you've moved in and your camero looks grand parked outside your house. Whilst admiring how the sun shines off it's paintjob you notice your neighbor, who happens to live in a house exactly like yours, has put his house up for sale. For $400,000! A quick phone call to your realtor tells you that home prices in the area have increased. Your home is also worth $400,000 now. This would be good debt.
Other examples of good debt would be to pay for a college education using student loans or setting up a business with a business loan -- because you're increasing your earning potential.
It becomes a little muddier when it comes to refinancing current debt, but using our rules of thumb if you have a credit card debt at a high interest rate, then paying that off with a low interest rate home equity loan would be a good debt. It's saving you money in the long term.
Now for bad debt. Anything you buy, like that Camero, that depreciates as soon as you buy it is bad debt. If you use a credit card or other high interest loan, then not only do you lose the amount that the item instantly depreciates by but then you have the privilege of paying interest on the full ticket price. So, if you get a 10% loan to buy it, you'll end up paying $55,000 for a car worth $30,000.
And that's BAD CREDIT!
It used to be that credit companies would only look at good risk customers. They wanted to make sure that the loans could be repaid. But then, it used to be that cars couldn't travel faster than 30mph and you'd still have change from a twenty after a good night out. Things have changed.
Now, anyone will loan you money whether you have good credit or bad.It's the debt cycle that these loan companies love. If you find yourself in the debt spiral all you cn do is get even further into debt. And people wonder why America is in the trouble it's in?
It's no secret that debt is a complex subject. We all have it. We all hate it. We're all tempted to have more of it. But is more good or bad when it comes to debt?
Some credit is good. But before you rush out and start spending your yet to be earnt cash you need to know what debt is good. A mortgage is a good loan, for instance, whereas a credit card is bad credit! A business loan is good, but a car loan not.
So how do you know what's good debt and bad debt. Well, the experts have a very simple rule of thumb and it's as follows:
Assuming you had to take a loan out to buy something then:
If, as soon as you buy it, it depreciates in value, then that'd be a bad debt loan
and conversely:
If what you buy has a chance to appreciate in value, then that would be a good debt loan.
So, a few examples. You see that Camero in the car sales forecourt and it's just screaming your name. You're sold before you even enter the showroom. No need to test drive it, you just need to know where to sign. $50,000 fine American dollars later, you drive it out of the showroom and onto the tarmac and instantly the car is worth $20,000 less than when you signed. That'd be bad debt.
So you're driving home and you see a lovely 4-bedroom home for sale which would make a great family home. You pull your Camero into the drive and you're lucky enough to find the realtor visiting. What luck! A few signatures later you've just bought a $300,000 home on credit.
After a couple of months you've moved in and your camero looks grand parked outside your house. Whilst admiring how the sun shines off it's paintjob you notice your neighbor, who happens to live in a house exactly like yours, has put his house up for sale. For $400,000! A quick phone call to your realtor tells you that home prices in the area have increased. Your home is also worth $400,000 now. This would be good debt.
Other examples of good debt would be to pay for a college education using student loans or setting up a business with a business loan -- because you're increasing your earning potential.
It becomes a little muddier when it comes to refinancing current debt, but using our rules of thumb if you have a credit card debt at a high interest rate, then paying that off with a low interest rate home equity loan would be a good debt. It's saving you money in the long term.
Now for bad debt. Anything you buy, like that Camero, that depreciates as soon as you buy it is bad debt. If you use a credit card or other high interest loan, then not only do you lose the amount that the item instantly depreciates by but then you have the privilege of paying interest on the full ticket price. So, if you get a 10% loan to buy it, you'll end up paying $55,000 for a car worth $30,000.
And that's BAD CREDIT!
Home Loan? Obama to Pay!
It's been almost a year since President Obama announced his plan to assist the American housing market. So what does this mean for you?
Each and every one of us has been hard hit by the current economic crisis. We all know someone who's lost their job. Or maybe you've lost your job yourself. And all of a sudden we can't make payments on credit cards, car loans or home mortgage payments. And with that, the bad-credit albatros soon starts to weigh us down. With unemployment, high interest rates and the ever escalating cost of homes maybe you now owe more than the home is worth, or maybe you simply can't make the monthly mortgage payment.
Step in President Obama and his Home Refinancing Stimulus Package!
Part 1. Home Affordable Refinance program.
Aimed at helping some 9 million American home-owners, this program requires that you are not defaulting on your mortgage among numerous other requirements. If you qualify, this program will lower your mortgage interest rates, which in turn will lower your monthly payment. So, although the principle remains the same, you pay less interest per month which is a good thing because the equity you have in your home will continue to increase. The last boarding call for this plan June 10, 2010. If you meet the requirements.
To qualify:
- It must be your home and you must occupy it
- You must not be in arrears on your mortgage payments (in fact no payment within the past 12 months should be more than 30 days late)
- You current home mortgage should be somewhere between 85% and 105% of your home's current value
- Your home must not have been on the market during the past two months
- The home loan goes through Freddie Mac or Fannie Mae
To qualify Obama's Home Loan Modification Program, your primary residence housing expenses must be greater than 38% of your total pre-tax income. The government and your loan lender will work together to reduce your home loan expenses down to 31%. Every month you make a mortgage payment on time, the government will make a payment applied directly to your principle, up to $1,500. The subsidy for the program may run up to $10,500 per home. You have until December 31, 2010 to apply for this program.
Sounds good right. You want to avoid bad credit and keep pushing the equity into your home ... but there are some requirements to meet for this home loan mod:
- The home must be your primary residence
- The loan must be controlled by Freddie Mac or Fannie Mae
- Your current home loan must be less than $729,750 and been drafted before January 1, 2009
- You can only apply if you're having financial hardships such as a loss of employment or your wages have been cut
- Your mortgage payment must be more than 38% of your gross income.
Of course, things change so make sure you check with your bank or financial advisor.
What we really have to wonder is whether with all these restrictions and stipulations whether these plans are just lip-service or viable working programs which will dig America out of the whole it's currently in?
Home Equity Loans - Pitfalls to Avoid
A Home Equity Loan (sometimes abbreviated to HEL) is a loan where a homeowner borrows money by using their home as collateral just the same as in a mortgage -- in fact a Home Equity Loan is a type of second mortgage. People who want to borrow a large sum of money or people who have bad credit find Home Equity Loans attractive. A Home Equity Loan should not to be confused with a Home Equity Line of Credit (or HELOC).If you have bad credit, then the Home Equity Loan may be your best chance of getting a loan because lenders see the risk of default (or at least the risk of them not getting their money back) as being low. They (the lender) have your house as collateral and if you default they'll sell your home, making back what you owe them (and then some). Given this risk, you (the borrower) are highly likely to make sure you repay the loan.
Home Equity Loans are attractive to borrowers -- here are the top three highs:
- Easier to qualify for if you have bad credit
- Borrowers can get large loans
- Typically have lower interest rates than credit cards or other types of loan
It's this risk that you should be most aware fo before considering a home equity loan. IF YOU DEFAULT ON YOUR LOAN YOU RUN THE RISK OF LOSING YOUR HOME! This is the No 1. pitfall.
Another thing to be wary of when it comes to home equity loans is that there are plenty of charletons who will be more than happy to cheat you from your money (or your home!) Make sure you know who you're doing business with, that they're reputable and their business is legitimate. If you feel in any way unsure, walk away and find another loan broker! There are plenty out there and this will help you not only find a legitimate broker, but also a better price.
Shop around for your Home Equity Loan. This could save you THOUSANDS of dollars. Go to banks, brokers, credit unions etc. and compare their offers with what you see on websites.
A cautionary note here though. If you see a good offer on a website MAKE SURE IT'S LEGITIMATE. There are plenty of scammers out there who will take you're money before you can bat an eyelid.
So while the Home Equity Loan may be attractive, there are also so lows to bear in mind:
- Your home is at risk if you default on your loan
- There are many scammers who will part you from your money or your home
- The first offer you get may not be the best. Try to avoid rushing into a deal.
Bad Credit Home Equity Loan Tips
Having a good credit score makes getting Home Equity Loans with lower interest rates easier. But if you have bad credit it's not impossible to get a loan, you'll just end up paying more interest.First, stop and think. Is your credit already bad? Do you really need a loan?
In all honesty, if you already have bad credit, you should really only be thinking about taking out a Home Equity Loan if it's an emergency. There are times when you might want to bend this rule though: you may want to improve your education (and take out a loan to pay for tuition) so you can get a better paid job, or take out a bad credit Home Equity Loan to start up a business which will provide you with a higher income. These two scenarios will, in the long term, help you with your current bad credit and long term financial situation.
Getting a bad credit home equity loan isn't difficult -- just remember lenders will see you as a risk. They'll expect you to pay higher interest on the loan and they'll secure the loan against your house -- so if you default in your repayments, they'll simply repossess your house and sell it. Guess who keeps all the money? It's won't be you.
There are a few things to remember. Firstly, don't apply for many Home Equity Loans from many different lenders. Every time you apply for a loan (or a credit card), the lender will check your credit score. And every time your credit score is checked it lowers a little. This is the last thing you want if you already have bad credit. The lower your credit score, the more difficult (and expensive in terms of interest) things will become. Remember though, you can check your own credit score for free once a year from all three of the credit reporting agencies (Experian, TransUnion and Equifax). Using your free annual credit report DOES NOT effect your credit score -- it's a legal requirement that these agencies provide you some unpenalized way to check your credit for mistakes.
Check out your Home Equity Loan options.Shop Around! Different lenders will offer you different interest rates and terms. Get the best deal you can find.
Assuming you have bad credit, you'll want to TAKE OUT THE SMALLEST LOAN POSSIBLE. Remember you'll have to pay loan this back, just like a mortgage, with a set payment per month. If you can't make the payment you risk losing your home and reducing your credit score further. Make sure you can realistically repay your Home Equity Loan! If you can, pay more than the monthly minimum - the credit reporting agencies will love you. It shows you can handle debt responsibly and your credit score will start to rise.
If you're using your Home Equity Loan to repay existing debt make sure that your monthly repayments ARE LESS than what you already pay each month. Chances are, if you need a Home Equity Loan to repay bad credit then you're finding it tough to make your existing monthly payments. Don't make it more difficult. Sounds obvious, but the obvious has a way of getting away from us when we're under pressure.
So you CAN get your Home Equity Loan. Just make sure you keep your sights on your goal: turning bad credit into good credit. Don't over-reach your financial situation and, in the imortal words of Douglas Adams,DON'T PANIC!
Home Equity Loan & Bad Credit? A Good Idea?
What is a Home Equity Loan?Well if you're here you probably already know. But if you don't let's spell t out. A Home Equity Loan (abreviated to HEL) is loan which borrows against the equity in your home and uses it as collateral. so it's kinda like a mortgage. A Home Equity Loan is not the same as a Home Equity Line of Credit (HELOC). A Home Equity Line of Credit is a revolving credit line typically with an adjustable interest rate whereas a Home Equity Loan is a one time lump sum, a fixed interest rate and which reduces the equity invested in your home.
And What is Home Equity?
Home Equity is simply the market value of your home less anything you owe. A very simple example: If your home is worth $100,000 and you've paid $20,000 off your mortgage then your home equity is $20,000. Now, if your home has appreciated in value by 20% then it'd be worth $120,000 -- of which you've paid $20,000. Add in the extra $20,000 from appreciation and your home equity is now $40,000. And if you refitted your kitchen, upgrading it by $10,000 and a realtor assesses this improvement to be a $20,000 appreciation, then you can add that on too. So now you have $60,000 worth of home equity and that's what you can use for collateral against your home equity loan. Simple, huh?
So is it a good idea to take out a Home Equity Loan if I have Bad credit?
Well, a Home Equity Loan creates a lien against your property and as such anyone who has a bad credit rating will likely find a home equity loan out of their reach.
And you also need to know that if you can take out a Home Equity Loan, the debt is secured against your property. This means if you default on your loan payments your lender will try to recoup the debt by selling your home!
So beware. If you're looking to pay off that credit card debt you rang up by redoing your $10,000 kitchen a home equity loan might not be the way you want to go about it. By using a home equity loan to pay off bad credit you'll be swapping an unsecured loan for a secured loan. However, your interest rates will be lower and by using your loan well you may well be able to do something about your bad credit.
So I'm out of luck if I have bad credit? So What's A Bad Credit Home Equity Loan?
No, you're not out of luck. You can get a home equity loan if you have bad credit. Just expect to jump through some hoops. A Bad Credit Home Equity Loan is a home equity loan specially made available to people with a bad credit score. The difference between Bad Credit Home Equity Loans and regular Home Equity Loans is that Bad Credit Loans have a higher rate of interest. What interest rate will you pay? Well that will depend on your credit score. But the lower your credit score, the more interest you'll pay.
However, it's always worth your while to shop around the lenders to see who'll give you the best interest rate on a Bad Credit Home Equity Loan. But remember, your loan will be secured against you home -- if you're unable to pay the loan, the lender will simply repossess your house.
How to quickly find a BAD CREDIT HOME EQUITY LOAN
You're in a pinch and you need a home equity loan. But from where? If you have bad credit and need a home equity loan you need to see this.
Times are tough. Real tough. Bad Credit Home Equity Loans are what you need. You don't need my sympathy, you need my research. Bad Credit Home Equity Loans are not that tough to come by. In fact Bad Credit Home Equity Loans are easy to find ... if you know where to look.
Bad Credit Home Equity Loans Blog is in the process of being updated. Please be patient while we bring our articles to http://bad-credit-home-equity-loans-equity.blogspot.com/
Times are tough. Real tough. Bad Credit Home Equity Loans are what you need. You don't need my sympathy, you need my research. Bad Credit Home Equity Loans are not that tough to come by. In fact Bad Credit Home Equity Loans are easy to find ... if you know where to look.
Bad Credit Home Equity Loans Blog is in the process of being updated. Please be patient while we bring our articles to http://bad-credit-home-equity-loans-equity.blogspot.com/
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