Home Equity Bad Credit Loan
Know What You’re Dealing With
A Home Equity Bad Credit Loan is a ‘Lump Sum Loan’ that uses the equity in your home as collateral. In other words what you’re doing is borrowing against your home; you’re placing your home on the line if you default on the loan.
People take out a home equity bad credit loan for various reasons. Usually for something Major like an urgent big ticket home repairs, medical emergencies, college tuition, or even consolidating high interest debt. These are just a few examples.
You are free to use the money for whatever you’d like. However, if it’s not for a Major reason, it’s not good to keep dipping into the valuable equity of your home. It’s just not something you want to make a habit of.
A strong benefit of a Home Equity Loan (HEL) is that the interest is usually at a fixed rate — an it is typically lower than other loans. Also the interest on the loan is generally tax deductible because it is connected with your home. This is why many people take advantage of a home equity loan as a debt consolidation strategy.
A Home Equity Loan is actually considered a 2nd mortgage. It will take a ‘second-seat priority’ to your original mortgage.
Therefore lenders view this as an added risk because they know if you run into financial difficulties, your original mortgage must be satisfied First before this home equity second mortgage is.
This is why they safeguard themselves as much as possible by using the equity of your home, and even the home itself if necessary, to secure your home equity loan.
Of course home equity loans for bad credit are subject to higher interest rates, fees and stricter penalties than a prime home equity loans. There is very low tolerance if you miss a payment or pay late, so be it is extremely important to handle your loan responsibly because you definitely don’t want to ruin your credit any more AND risk losing your home.
A home Equity loan is nothing to play around with. If you default you might just find yourself homeless. But, if you’re positive that you can handle the payments on your loan, this is one of the best routes that you can go to access a lump sum of cash at a reasonable rate.
With many Home Equity Bad Credit Loans, it is possible to withdraw up to 100% of the appraised value of your home. However this depends on the lender that you go through. In many cases it is also possible for loan repayment to be spread out up to 15 years or more. Be sure to find out exact terms and repayment requirements from lenders when you shop.