Poor Credit Home Equity Loan Tips - How To Find The Best Home Equity Loan
Written by: Carrie Reeder
Home equity loans are perfect for bad credit individuals who
cannot get approved for a personal bank loan. There are several
advantages and disadvantages to obtaining a home equity loan.
These loans gain a lot of attention because they are easy to
qualify for. On the flip side, home equity loans are taken out
against your property. Thus, you run the risk of losing your
home if you are unable to repay the loan.
Advantages of Applying for a Home Equity Loan
The advantages of home equity loans are numerous. While these
loans carry interest rates higher than first mortgages, the rate
is noticeably lower than most credit cards. Instead of making a
huge purchase using a credit card, homeowners may benefit by
applying for a small home equity loan.
The loan terms for a home equity loan are shorter than first
mortgages. Typical loan terms are five to fifteen years. On the
other hand, if you were to use a credit card, it may take you
many years to payoff a small balance. Home equity loans are
perfect for emergencies and huge expenses. These may include
home improvement projects, debt consolidation, college tuition,
wedding expenses, or vacation.
Home Equity Loan Dangers
Before applying and accepting a home equity loan offer, it is
essential to carefully weigh your finances and discern whether
you can afford an additional monthly payment. In most cases,
homeowners use the funds acquired from a home equity loan to
payoff high interest credit card balances and other consumer
debts. In this instance, homeowners may save money because the
home equity loan payment is much lower than previous debt
payments. Be careful if you are obtaining a home equity loan for
another purpose, thus creating an entirely new debt.
How to Choose the Best Home Equity Loan
When selecting a home equity loan and lender, homebuyers must
shop around. Money sources include traditional mortgage
companies, banks, and credit unions. These lenders offer prime
rates, thus they prefer to work with good credit applicants. If
you have bad credit, a mortgage broker is your best alternative.
Mortgage brokers have access to various lenders that offer sub
prime loans. These loans are geared specifically toward
applicants with a low credit score or no credit history. By
submitting an application through a local or online broker site,
your application will be reviewed, and you will receive quotes
from the lenders.
Before choosing a home equity loan package, homeowners should
compare all quotes received. The mortgage loan interest rate
offered is important. A low rate mortgage will lower your
monthly payments, whereas a higher rate results in higher
payments. To guarantee a low rate, homebuyers should attempt to
boost their credit score before applying for a loan.
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