Bad Credit Equity Loans Reconsidered

Bad credit equity loans used to be out of the question for most homeowners. In recent years, however, this type of business has become more attractive to certain lending institutions. The market is there, and lenders have been quick to capitalize. What this means to homeowners seeking bad credit equity loans is a potential solution to their financial problems.

Bad Credit Equity Loans in a Tightening Financial Market

Recent losses in the subprime mortgage lending market have topped many billions of dollars. That means loan programs for most lenders have tightened considerably. The days of no-documentation loans or stated-income loans are a thing of the past, at least for now. And for homeowners with bad credit, the search for a lender willing to grant a home equity loan is that much more difficult. Look for a lender that specializes in providing bad credit equity loans.

Having a Good Job: Key to Obtaining Bad Credit Equity Loans

If you have a good job and have been with your employer for several years, this is a factor the lender will take into consideration when looking at your application for a bad credit equity loan. Skipping around from job to job is an indication that you can't uphold your obligations, and lenders will generally write you off as a poor risk. If there are good reasons for hiatus in between jobs - like military service or medical illness - explain the situation to your loan officer. This may mitigate the situation or they may be able to tailor a bad credit equity loan to suit your needs.

How Bad Credit Scores Impact Bad Credit Equity Loans

There's no question that bad credit scores, or scores under 500, may put you at a disadvantage when it comes to obtaining an equity loan, there are lending institutions that will work with you. Your best strategy is to work at improving your credit history for 6 months by paying your bills on time every month. This demonstrates to a potential lender that you have the ability and willingness to repay your financial obligations.

Paying Bad Credit Equity Loans Improves Your Credit

Once you secure your equity loan and make regular, on-time payments for a period of a couple of years, your overall credit history and scores will improve. First, you save money by consolidating higher-interest consumer debt and recurring obligations, or obtain a bad credit equity loan to help pay for home remodeling or other project at more attractive rates than other sources. Second, you benefit your future prospects for obtaining a new equity loan or combination first and second mortgage into one mortgage at better interest rates.

Expect to Pay Higher Interest Rate For Bad Credit Equity Loans

Due to the fact that lenders are taking a significant risk making bad credit equity loans, the borrower can expect to pay higher interest rates for these loans. In addition, extra fees and/or greater down payments are the norm. By law, the interest rate and all terms and conditions have to be clearly spelled out for the consumer.