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!