Bad Credit Equity Loans

Bad credit equity loans are mortgages placed on real estate in exchange for money provided to the borrower whose credit score isn't as high as the lender would like. Typically, these are offered with extremely high interest rates attached. Lenders utilize these higher interest rates for bad credit equity loans to offset the all too often higher rate of defaults on such loans.

How Does the Lender Decide Whether I Have Good or Bad Credit?

The information in your credit report is compiled and sold by a credit agency to those organizations that are considering whether to offer credit to you. While it is the credit agency that provides the credit score, it is the lender who will judge whether or not that score is good enough to merit a loan.

Different lenders will, of course, operate according to their own in-house policies regarding how much they will lend to those within a certain credit score range. As a result, any potential borrower should understand that not all credit scores are created equal. While one lender might consider you for a bad credit equity loan based on a certain credit score, another might dismiss you out of hand for the very same score.

How Will Bad Credit Affect My Ability to Obtain an Equity Loan?

In many cases, bad credit will result in you simply not being offered a loan at all. However, should you find a lender who is willing to offer you a bad credit equity loan, be prepared for a much higher interest rate. Moreover, the lender might shy away from attaching a fixed interest rate to the loan in favor of a variable interest rate for the life of the loan.

How Can I Obtain an Equity Loan With Bad Credit?

There are some steps that you may take in order to ensure that your credit score helps you instead of hindering your pursuit of an equity loan. Before applying for any equity loan, borrowers should attempt to mend their credit issues in a few simple ways:

  • Pay off old debts - Any outstanding utility bills or credit card bills will show up as an immediate red flag for lenders. Moreover, if these same bills were consistently paid late or irregularly, lenders will mark you as a high risk borrower and only offer you especially high interest rates.
  • Check your own credit report - No company is perfect and can often make mistakes. Therefore, checking your own credit report for errors, omissions or oversights can go a long way to improving your credit score. Not only will this allow you to view and affect your credit score, but it will also allow you to view your total amount of debt in relation to your total gross income. Lenders do not get excited about giving a bad credit equity loan to someone whose debt is already overwhelming their meager income.
  • Multiple lenders - Because different lenders operate according to their own in house rating system when it comes to credit scores, seeking out multiple lenders is always a good option when seeking bad credit equity loans. While some of these lenders might offer loans with only variable interest rates attached, another might offer only a moderately high interest rate that is at the same time fixed.