The importance of having a good credit score in helping you get financing for many of your projects can never be overstated. You need it for getting credit cards at low interest rates, getting home loans and auto loans at interest rates you would otherwise have to only dream about. A good credit rating would sometimes be required if you wanted to live in certain kind of residential areas.
If you have bad credit it just makes things a little more tricky when you need a loan or a credit card. But if you have a home, it can help convince lenders to give you the money you need. Using your home's equity, you can get a home equity loan, with your home being used as collateral.
Lenders prefer this arrangement because it gives them assurance that they can always get their money back should the borrower default because of bad credit behavior or history. They would essentially take your home as payment for the loan because you used as collateral. This is a danger for someone who has poor credit history and owns a home because they have a historical tendency to default on the loan.
So if you have a home and would like to use the equity in the house to get a loan use these 6 tips to help keep your home.
1. How much equity do you have in your house?
Evaluate your home's equity. There are two ways of doing this:
(a) Have the house's current value estimated or appraised to know the equity in the house.
(b) You can also deduct the current mortgage balance from the value of the home to give you the equity in the house.
2. How much disposable income do you have?
Determine how much money you have left after your total expenses. Using your yearly checking account leger, add your total expenses from last year and divide that by 12. This will give you your monthly expenses. Then determine your total net income for the past year. Deduct your total expenses from your total net income to know how much you have left over.
3. How much can you comfortably borrow from the lender?
Determine how much you can afford to borrow from a lender. The most practical way of doing this is using a home equity amortization calculator. Go to WellsFargo.com to use an online calculator. Also remember that you can normally borrow up to 80% of your home's equity.
4. Now it's shopping time.
Go to loan comparison websites to look for the best lenders. When giving your information on lenders forms, be totally honest with regards to your bad credit score or history. Why? It will give you the most suitable lenders and also protect you from unexpected charges and fees later on. Entering information that projects you better than you really are will not do you any favors.
5. What if the big lenders ignore you?
If you are refused by any of the famous mortgage lenders, don't lose heart.
There are other lenders who specifically give home equity loans to people with bad credit. You can find them on mortgage-lenders-plus.com. However, make sure to confirm each of lenders reputation with the Better Business Bureau, BBB. If you find a lender you would like to borrow from but can't get information about them from the BBB's database, stay away and look for another lender.
6. Be cautious.
Sometimes when you are on loan comparison websites, somehow people get to have your information and what you are looking for without you knowing. Before you know it, you are being sent information you actually did not request expressly. If you have not solicited any information from any lenders, be wary of doing business with them.
Find out as much as you can about them, especially on review sites about what others are saying about that company. If the offers presented to you seems too good to be true, be extra careful too. Never assume that because you have bad credit score you need to pay more.
If you follow these steps you should be able to get a home equity loan easily even if you have bad credit rating.