Getting Home Equity Loans With Bad Credit Despite Bankruptcy

Getting Home Equity Loans With Bad Credit Despite Bankruptcy

by

Mary D Wise

Bad credit is often seen as an Achilles heel when applying for funding, so it stands to reason that a bankruptcy ruling should be enough to kill off the chances of approval. In fact, if the security is right then there is no reason why either should cause a problem. Getting home equity loan with bad credit is almost certain even if bankruptcy lingers in the background.

There are some reasons why lenders are willing to grant what is often a significantly sized loan with such a poor credit history. For a start, approval with bankruptcy is not the high risk is seems to be when equity is provided as security.

This is good news for homeowners who have managed to repay a large portion of their mortgages to date. It means that significant home equity loans are available, making it possible to tap into the cash cow to clear financial difficulties.

Understanding How Equity Loans Work

Equity relates to the amount of the value of the home that is actually owned by the borrower. Each time a mortgage repayment is made, the amount of equity increases, and the amount of potential security for a loan becomes available. And since security negates the influence of low credit scores, a home equity loan with bad credit becomes more possible.

Say, for example, a mortgage worth $250,000 was used to buy a home 10 years ago, then as much as $85,000 will have been paid off the balance. That means equity of $85,000 exists. Market changes might also have seen the value of the home increase in that time, to maybe $300,000. This also affects the amount of equity, so a total of $135,000 becomes available.

Of course, it is possible to get approval with bankruptcy because, with equity used as security, lenders know they can recoup any losses. This is the great advantage when applying for a home equity loan, but of course there are also risks to providing any form of security too.

Why Bankruptcy is Ignored

Providing equity as security helps to secure a home equity loan with bad credit because of the value of the security itself. So, for many lenders, the issue of bankruptcy does not really come into the equation at all.

The core reason is that buildings and land never really depreciates to any great degree, they always retain their value. It may be true that markets fluctuate, reacting to inflation and recession and such. However, this is more to do with the value of money than the land itself. Approval with bankruptcy is viable because just as the value can fall, it can also increase.

It is not the same situation with other forms of security. For example, a car will depreciate steadily so that in just three years, it may be worth only half of the purchase price. However, land has permanency about it, thus making home equity loans so popular.

Getting the Best Deal

The best deal is usually found with the right lender. For example, the chances of getting a home equity loan with bad credit, especially one that is affordable, are quite slim with traditional lenders like banks. Alternative lenders, such as those found on the Internet, usually offer far better terms.

Searching online is made easier through comparison sites, setting the leading offers against each other to facilitate fast comparison. Also, the chances of getting approval with bankruptcy are helped by the fact the lenders are experts in bad credit financing.

Of course, as with all online deals, be sure to check the reputation of the lenders with the BBB website. A home equity loan can be a sound financial move, but only if the lender is reputable.

Mary Wise is a certified loan consultant who helps people get approved for

Guaranteed Bad Credit Personal Loans

and

Bad Credit Mortgage Loans

. To get help with your financial situation you can visit her at

badcreditloanservices.com

Article Source:

Getting Home Equity Loans With Bad Credit Despite Bankruptcy