Can You Get a Home Equity Loan with Bad Credit?

We all know that a poor credit rating complicates matters in your efforts to get affordable mortgage rates, affordable bank loans, auto loans, or even insurance premiums. The question in the minds of many people is, can you get a home equity loan with bad credit? You can get a home equity loan with bad credit but you will need to have money invested into the equity in order to do so.

A home equity loan is basically a loan that a lender approves as a percentage of the amount of money you have invested in the house. Your home will be the collateral for the loan. If you do not make payments on the note, your home will go into default and the lender can begin the foreclosure process. The instructions below are easy and will show you how to avoid making mistakes when you take out another loan against your existing loan.

Find your latest mortgage statement, get a recent appraisal on the real estate, find the amortization schedule for your home loan payments; arm yourself with a calculator, and your checking account information. Now that you have all these information, let’s start at Step 1.

Step 1

For starters, you need to know how much money you have in your home equity. This is instrumental in helping you approximate the amount of money that you can borrow. Look at the purchase price and then at the amount you have paid towards the principal. The balance due on your latest mortgage statement will give you the amount you have paid. You will need a recent appraisal on your home. The importance of an appraisal is that if your home’s value has appreciated, you will be able to borrow an even larger amount.  You can get a home equity loan with bad credit if you have equity to borrow and the income to make the loan payment.

Step 2

Make a budget that shows your total disposable income and your total monthly expenses. Look at your checking account activity for the past few months to determine how much you have deposited and how much you have spent. If you total the amount for an entire year and divide the total by 12 you will find the average monthly amount that you have to allocate to another home payment.

Step 3

You can get a home equity loan with bad credit if you can afford it. Go on line to WellsFargo.com and find the amortization calculator on their website. You’ve already determined the amount that you want to borrow in the step above. Ask the loan officer for the rate of interest and the number of months you have to repay the note. You will find that the loan officer will quote a rate between 8% and 15% if your credit score is not high enough. The percentage cap that you can borrow against the equity is 80%. Using the online calculator plug in the figures that are specific to your loan and you will find the monthly payment amount.

Step 4

Be sure that you are getting quotes from two or more lenders so that you can choose the plan that is most advantageous to you. You can look online at LendingTree.com for information on loan comparison. If you are not honest when you make application for the home loan the loan officer will find the discrepancy and you will limit your chances of approval.

Step 5

If you are turned down on your application by the loan officer go to Mortgage-Lenders-PLUS.com. This website specializes in arranging lending for those who have bad credit reports. Look at the Better Business Bureau website to make sure you are working with an honest and legitimate lender and one who has not been reported for bad business practices.

Step 6

If you receive a postcard or flier in the mail that offers you loans on your home do not respond. You may find that the fees associated with such lenders and the interest rates paid are a lot higher than those of traditional lenders. Sometimes these lenders will tack on points for your loan that can run into thousands of dollars. Ask how much the points are and if they are more than 1% of the total value of the loan, find out why.

If you cannot find out any information about the lender that you are working with from the Better Business Bureau website, you may not want to take your loan business to them. You can get a home equity loan with bad credit, but be sure that you understand all the terms of the loan before you decide on that option.

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