Bad credit home equity loan

A bad credit home equity loan is a loan that helps secure funding for a person who has bad credit but has also built up a reasonable amount of equity on his or her home. Equity refers to the amount of money that has been put into a home or a piece of property and in times of financial distress, it is possible to take out loans that are based on the amount of equity you have. Often your home will be offered up as collateral to secure the loan. Home equity loans are also referred to as second mortgages.

Home equity loans for people with bad credit

Having bad credit is not the end of the line – especially if you have a home that has some equity in it. There still are lenders who will be glad to talk to you. In fact, they know that this kind of loan may be just what you need to help you consolidate your debt and get off to a better start. Your equity is valuable to you and can enable you to get the cash you need. Here is what you need to know. It is important that you understand that a home equity loan is a loan against your home. This means that should you default on your payments, you could lose the house – plain and simple. So, before you decide to proceed with applying for a home equity loan, it is important that you make sure your own present financial situation can adequately handle it. Sit down and calculate how much you can afford and how much you need.

A home equity loan can be either fixed rate or adjustable rate, enabling you to make a choice here according to your needs and the economy. Keeping an eye on the market rates will enable you to know when you should get your loan.

Interest on home equity loan deductible

Paying off high interest credit card debt with a home equity loan can certainly help financially troubled families make ends meet. And in some cases the interest on home equity loan may reduce your tax liability.

Equity loans can work a couple of different ways. The first option is a fixed term and fixed amount. Typically these mortgages are made for periods of from five to twenty years. Each payment is the same and the loan is paid off at the end of the term. For example, you borrow $20,000 for ten years at a fixed rate and at the end of ten years the loan is paid off.

The second alternative is a line of credit secured by your house. The line of credit can increase and decrease just as a credit card balance does. The monthly payment is usually based on 1.5% to 2.5% of the outstanding balance. As with a credit card, this balance can go on almost indefinitely as long as the borrower pays the interest and a small amount of the loan principal each month. Many institutions will end the line of credit after ten years and require that the balance be paid off over the next ten years.