A bad credit home equity loan is a viable solution if your credit is not so good, yet you would like to
make home improvements, lower your monthly bill payments or tap into the equity in your home for any reason.
The amount that you can borrow for a bad credit home equity loan will depend on the difference between the value of your
home and the amount of money you currently owe on any existing mortgage loans.
Not all lenders offer bad credit home equity loans. The lenders that do offer bad credit home equity loans will likely charge
a higher interest rate than they would to borrowers with excellent credit.
-- Credit Tip by FindLocalBanks.com
Federal law requires that all creditors must state the cost of their credit in terms of an Annual Percentage Rate (APR). This rate takes into account how the loan is repaid on a yearly basis, and allows you to accurately compare the cost of credit among lenders. For example: You borrow $1000 for one year and pay a finance charge of $100. If you can keep the entire $1000 for the whole year and then repay $1100 at year’s end, you are paying an APR of 10 percent. But if you repay the $1000 and finance charge (a total of $1100) in twelve equal monthly installments, you don’t really get to use $1000 for the whole year. In fact, you get to use less and less of that $1000 each month. In this case, the $100 finance charge amounts to an APR of 18 percent.
However, just because the interest rate will likely be higher for a bad credit home equity loan, that doesn't mean you should not consider one as a viable financing solution.
Even if the interest rate for a bad credit home equity loan is in the low teens, it is still better than paying 21% on some credit cards.
Also remember that the interest costs on a bad credit home equity loan may be tax deductible (you can't say that about credit card interest costs).
-- Credit Tip by FindLocalBanks.com
The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.
Consult with a lending profesional to see if they offer bad credit home equity loans and ask if this is the solution you need based on your credit.
Don't be afraid to discuss options with a lender -- you credit may not be as bad as you think and the interest rate you would have to pay may not be as high as you think.
