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?

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!

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.

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