Bad Credit Home Equity Loans

Written by Liza Hartung
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Many people will apply for loans at some point in their lives. You might want to take a long-awaited romantic vacation to the tropics. Perhaps you are having your second or third child and want to add an extra room to your home. Maybe you want to buy a new car, get a new television, start a business or simply consolidate your debt. If you have bad credit, you may be scared to even apply for a loan.

Lots of people who have bad credit fear applying for loans because they think they will either be turned down, not get near the amount they were asking for or be subjected to extraordinarily high interest rates. While many of these things may be true, there is a way you can soften the blow. This is by applying for a home equity loan. You can use the equity in your home against a loan. This is also known as a secured loan.

Know about Your Equity Loan

You first have to have equity in your home. If you haven't started paying a good portion of your mortgage yet, you might not have any equity. When you use the equity on your home to get a loan, you are putting your house up as collateral against the loan. This means that, if you default on the loan, your lender has legal rights to repossess your home.

Since you have something of value to you on the line, you will find that lenders are more generous with the amounts they lend and the interest rates they charge. Before you go through with a home equity loan, it's very important that you come up with an easy-to-follow budget that will allow you to pay your monthly dues on time. If possible, pay more each month than is required.

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