Bad Credit Home Equity Loan Terms: Finding Better Deals

Finding a bad credit home equity loan is tough in today's tightening financial lending market. But it isn't impossible. Here are some points to consider as you search for a better deal.

Credit Repair Essential For Bad Credit Home Equity Loan

If you want to get the lowest possible deal on a bad credit home equity loan, you have to work on repairing your credit. Ideally, you need 6 months to make a significant dent in this process. Pay down your existing bad debt. Pay each bill on time and pay at least the minimum amount due on each bill. Simply paying your bills on time each month makes up about 35 percent of your credit FICO score.

    * Tip: Obtain Copies Of Your Credit Reports - You need to know what is on your credit report from all three nationwide credit reporting agencies: Experian, TransUnion and Equifax.
    * Tip: Copies Free If You Were Denied Credit - You can get a free credit report if you were denied credit in the past. You should also find out your credit score.

Use Online Tools To Search For A Bad Credit Home Equity Loan

Make your search easier by using the tools available at lender websites. On this site, for example, you can use our home equity calculators to find out ethical lender competitive rates. Select information in the drop-down boxes: loan type (home equity), type of home (single family, co-op, condominium/townhouse, mobile/manufactured home, multi-family), your state, and your credit score (excellent, good, fair, poor). Other tools include areas to input amount of loan, loan type, purpose and points. You will see information populated that gives lender name, rate, points, fees, term, APR, monthly payment, last updated and rating.

    * Tip: Try Several Inputs - Experiment using different loan types (home equity 15 year, home equity 10 year, home equity line of credit).
    * Tip: Call For Information - If you have difficulty, use the contact information (1-800-975-6759) to get in touch with a representative.

Better Deals Are More Than Monthly Payment

Recognize that you will pay a higher interest rate on a bad credit home equity loan with a FICO score of 350 to 619 (Poor), or a Fair FICO score of 620 to 659, compared with rates for an Excellent FICO of 750 to 850 or Good FICO of 660 to 749. But terms include other potentially negotiable items. Look at points, length of term, possibly modifying the requested loan amount lower, even changing to a home equity line of credit (where you only pay interest based on how much of your available home equity you use).

Establish Relationship With Lender

Working with your existing lender may be the best strategy. They already hold your first (primary) mortgage, and may be willing to work with you to put together a better deal on a bad credit home equity loan than another lender who isn't familiar with you. Even if you go with a new lender, explain your circumstances in detail, specifically how you are paying down your existing debts, what you intend to do with the home equity loan, and how committed you are to repayment of the home equity loan.

Stay With Your Current Job

When you are looking for a bad credit home equity loan is not the time to switch jobs. Stable employment is a prerequisite for any type of home equity loan, but even more so for those with bad credit. Stick it out so that when potential lenders check your work history, they'll see you have maintained your employment. This will potentially help you to obtain better terms in your bad credit home equity loan.