Friday, September 18, 2009

A Bad Credit Home Equity Loan is the Answer

By Charlotte York

Having poor credit is an unfortunate predicament as it limits your ability to easily access financing when you most need it. Do you have adverse credit and are wondering how a bad credit home equity loan is the answer to aid your ailing finances? A homeowner who has been making regular mortgage payments will likely have built up some equity in their home. The equity in your home is the difference between the home's appraised value and the outstanding mortgage balance. It is challenging to obtain loans when you have bad credit but the probability of getting a bad credit secured loan like a home equity loan is easier.

Getting a home equity loan with bad credit is one of the better things you can do to start rebuilding your poor credit rating. You can use the loan proceeds to reduce or fully eliminate your outstanding unsecured debts that have been adversely affecting your credit score. These unsecured debts such as credit cards and personal loans have exceptionally high interest rates. Lenders can offer comparatively lower rates on a home equity loan because it is secured with an asset, and hence represent lower risk. Consolidating such prohibitive interest bearing accounts into a single home loan will not only save you in financing costs but will also improve your credit score.

Because home equity loans for bad credit are underwritten against your home, you need to consider the consequences of your inability to make good on payments. The lender will not hesitate to foreclose on your home should you default. Therefore, think carefully about your financial status and the potential outcome before choosing this avenue of financing.

Once you've decided that a poor credit home equity loan is right for you, you need to solicit offers from potential lenders. It's important that you research lenders and shop around for the best financing offer. As with most things, you will run into good lenders and bad lenders. There is no need to be hasty and rush into a contract that you may regret.

Charlotte enjoys sharing information on poor credit such as the merits of bad credit home refinancing and how a bad credit home improvement loan can add value.

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