Learn how to get a home equity line of credit with bad credit.
Are you stuck with a low credit score because you have fallen behind on your credit card payments?
Like most people, you did not set out to create a situation where you have bad credit.
When you have bad credit, it affects everything from your ability to purchase a car or to apply for any number of unsecured loans that could come in handy.
You want to pay off your debts, yet you cannot get the financial assistance to do it because you are a high credit risk.
What can you do?
If you are a homeowner, and you have equity in your home, you can take out an equity line of credit on your home.
Here's how:
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Difficulty:
Moderately Easy
Instructions
1
Do some research on the Internet, and find several legitimate lending institutions that specialize in home equity lines of credit, and especially for people with a bad credit history. Once you have a list of four or five lenders compare the different interest rates for which you might qualify, and find the lenders with the best terms.
2
The next step is to determine how much equity you have in your home. The mortgage loan must be lower that than the value of your property, and enough so that about 80% of the difference between the two figures is higher than $10,000.
For example, if your home is worth $120,000, and you still have $80,000 left to pay on your mortgage, you have $40,000 in equity. Most lenders will underwrite home equity lines of credit for up to 80% of the equitable value in your home. In this case, you could possibly get a line of credit for $32,000.
3
Search for the best interest rates. The interest rates you get from a lender will depend on your credit score. However, with a home equity loan, this factor is not as important as it is with a first mortgage because the bank uses your home as collateral. If you do not repay the equity line of credit, the bank will foreclose on your home. If the interest rates are too high think about disputing things on your credit report to try and have some negative marks removed and try again in 60 days.
4
If you get and equity line of credit and your credit history can use some fixing up, a blemish-free repayment history on the credit line is an ideal opportunity for you to build up your credit score. Use the credit line only to pay off bad debts or for tuition for college, but do not use it for vacations or luxury items. Think of the home equity line of credit as a way for you to get out of debt, and to rebuild your credit one payment at a time.
While you're here be sure to take a look around for more information and tips on home equity lines of credit and bad credit issues.
