A home equity loan is a loan for the difference between the market value of a house and the amount of principal that is left in a current mortgage. If a house is worth $100,000 and a person has a mortgage balance of $50,000, he has $50,000 of home equity. The percentage of the total market value that can be granted in a loan depends on where a person lives, his credit rating, and a number of other factors. Taking out a home equity loan is, in essence, taking on a 2nd mortgage. A person’s home is used as collateral in an equity loan. This makes it incredibly important to stay on top of payments and to avoid taking out a loan that can’t be afforded.
Uses for Home Equity Loans
When a person receives a home equity loan, he will have a substantial amount of money to put towards other endeavors. People often use these loans to cover education costs, medical expenses, or to consolidate high-interest debt. Those who play the real estate market will often take the equity of a home and invest it in another property.
How about Putting the Money Back into the Property?
Securing a home equity loan can actually give a person the chance to make improvements on the house, itself. Equity can be used to put in a pool or make additions to the house. It can pay for new floors or landscaping. The money can also go towards enhancements that need to be made before a house is put up for sale. In this way, by taking money out of your investment, you can actually take steps to enhance that investment.
Mortgage Loan for Bad Credit
The good news is that there is a large and ever-growing number of bad credit mortgage loans available. Unfortunately, navigating the brokers and lenders, and understanding the many terms, rates, and fees, can be more of a headache than one would prefer. Finding a mortgage loan for bad credit borrowers is an easier job for a broker who has had considerable experience in working with many lenders and borrowers. Today, utilizing an experienced broker is almost a must.
Securing a Mortgage Loan for Bad Credit Situations–Is It Worth It?
Securing a mortgage loan can be extremely difficult and extremely expensive for a person with bad credit. There are a number of loans, like most 125 loans and short-term low fixed rate loans, that a person with bad credit simply cannot qualify for. People with a bad credit rating will often be denied for standard mortgage loans, as well. If someone with bad credit is approved for a loan, he will most likely have to pay a much higher interest rate than a person with excellent credit. In fact, on average, a person with bad credit pays 30 percent more in interest than the norm on mortgage loans and car loans. Over the course of a 25 or 30-year loan this translates into thousands of dollars of extra money that will be paid.
How to Secure a Mortgage Loan for Bad Credit
A person with bad credit can work with a credit counselor to find lenders that deal specifically in these types of loans. Bad credit lenders can be reached without a go between, but a person stands a better chance of finding affordable rates if he goes through a professional service. A counselor can also suggest methods that might bring a person’s credit score up at least a few points in a short amount of time. If someone’s credit is so bad that no bank or mortgage service will deal with him, his only option might be a subprime lender. Many subprime lenders will offer loans to just about anyone, even if they know there is no chance the loan will be repaid. A subprime loan will have tremendously high interest rates attached to it, and it will require a person to put his home up as collateral, so sometimes, for some people, not getting a loan is actually better than getting a subprime loan. The mortgage loan for bad credit options are diverse, and fully understanding what you are getting into is key.
Bad Credit Lenders
Bad credit lenders, for some, give hope where there was none. For others, however, bad credit lenders only make things worse. This stark contrast has made bad credit lending a hot topic of debate among those in the loan business and even among those on the floors of Congress. Almost every industry is home to companies that function ethically and try to make money while providing the consumer with the best service possible. Then, there are other companies that are only concerned with dollars and cents and have no real use for ethics. Unfortunately, bad credit lending is an industry that truly opens itself up to the latter.
The Practices of Bad Credit Lenders
Put simply, a bad credit lender gives loans to people who have bad credit. When a bank turns a person down for a mortgage loan, that person might still be able to get help from a bad credit lender. With nowhere else to go, a person is more likely to accept the incredibly high interest rates on loans that most bad credit lenders offer. In many cases, a person’s income will not allow him to cover the cost of the loan and he will default, turning his home over to the lender. “Are bad credit loans out of the question, then?” The nature of bad credit lending is somewhat predatory. However, there are companies that can be trusted, and that are truly dedicated to helping a person secure a loan that will help him rebuild his credit. These companies can be difficult to find, so doing thorough research into specific lenders before approaching them for a loan is well worth the time. Loan brokers and online quote finders can point people to multiple options which may suit their needs best.