How to Get a No Equity Loan

Many loan originations in the sub-prime market today are "no equity" or "125 percent" loans, which came into existence back in the 1990s. Truth is, these are just other names for a high loan-to-value home equity loan, which is relatively easy to obtain. The following steps will show you how to do this.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Computer
• Internet access
• Proof of income

1. Find out your credit score. Normally a no equity loan requires a high credit score since you do not have equity on your home.
2. Use your web browser and search Internet using the phrase "no equity loans" or "125 percent loans." This activity will give you a list of companies that offer this type of loan.
3. Do your research and choose the loan that is best for you.
4. Apply online or call the customer service department. If offered, you may want to complete a questionnaire to receive a quick quote from a loan company. Typically a service representative will contact you within one to three business days.
5. Provide proof of a consistent source of income.
6. Review all documentation thoroughly before accepting the terms of the loan.

Tips & Warnings

• You can use a no equity loan to pay off bills, for home improvements, or to consolidate debt. You can even take a vacation with this type of loan.
• There are no restrictions or requirements on the money.
• Don't apply for a loan unless you're a U.S. resident, at least 18 years of age, and the owner of the property securing the loan.
• You'll need to carry private mortgage insurance.
• Any interest paid on the amount exceeding the value of your home does not qualify for a tax break.
• If you need to sell your home before having any equity, you'll need to come up with the difference or the loan will go into default. This means that you could possibly lose your house.
• Interest rates are normally two to six percentage points higher than a traditional loan. Fees are higher, too.