Finding the Lowest Home Equity Loan Rate

How do you find a bad credit home equity loan rate? Lenders are more stringent in their requirements for financial products such as mortgages and home equity loans. This is true even for homeowners with excellent credit scores. But there is a market, and a very viable one, for bad credit home equity loans. Here are some things to consider.

Use Online Tools to find a Bad Credit Home Equity Loan Rate

The Internet makes your shopping for a bad credit home equity loan rate much easier than paying a personal visit to a mortgage or home equity loan lender - at least in the initial information-gathering stage. With diligence and patience, you can obtain current rate information on home equity loans that are updated daily and posted on various lending institution websites. These rates, however, are posted for those with excellent FICO credit scores of 750 to 850, or good credit scores of 660 to 749. You can go to individual mortgage or home equity loan lenders and use their calculators or rate finders or go to a mortgage aggregator site to compare rates across multiple lenders. You'll probably start with the aggregator and then drill down to the individual lenders that offer more competitive rates.

Obtain Your Credit Score and Credit History

In your search for a bad credit home equity loan rate, it's vital that you first know exactly what's in your credit history and the current total of your credit score. A poor FICO score is 350 to 619, while a good FICO score is 620 to 659. You may have a little more leverage with a good FICO as compared to a poor FICO, but you still will have an uphill battle to obtain a bad credit home equity loan rate.

Pay Down Debt to Increase Creditworthiness

If you have some time, about 6 months is good, pay down some of your existing bad debt to help repair your credit. This means paying on time and paying at least the minimum due on all your outstanding debt. In fact, paying your bills on time makes up 35 percent of your FICO score. Your credit history will stay on your credit report for 7 years, while bankruptcy stays on for 10 years. But every positive (on time, every time) mention on your credit report works to eliminate the negatives of your past history.

Consider a Mortgage or Home Equity Loan Broker

Mortgage brokers have the ability to get rates from multiple lending institutions that they work with. Often, due to the volume of the business they provide to the lenders, these mortgage brokers are able to obtain a bad credit home equity loan rate for their customers. It is certainly worth touching base with a mortgage broker to see how they can help you.

Work with a Selected Lender

You may find that it is best to work with a selected home equity loan lender, perhaps the same lender that holds your home's primary mortgage. Since a home equity loan is in effect a second mortgage, secured by your property (but subordinate to the primary mortgage), the lender who already holds your mortgage may look more favorably on your request and give you a better bad credit home equity loan rate.