There are times in a person's life when their cash flow gets tighter than it had been before, either due to reduced income opportunities, increased expenses or both. At other times, cash flow is fine but there arises the need to meet upcoming irregular expenses head-on, such as medical bills, a wedding, or home improvements. Or, maybe the person just wants to find a way to pay down high-interest debt such as credit card debt.
If the person is a homeowner, one way to potentially solve each of these financial challenges is by taking out a loan against the equity in their home - or a 2nd mortgage.
If you are would like to get a home equity loan or a 2nd mortgage for bad credit individuals, here are answers to 5 frequently-asked-questions (FAQs):
1. Is a home equity loan the same as a 2nd mortgage?
A: Yes, a traditional home equity loan and a 2nd mortgage are two names for the same thing. With this type of loan, the borrower takes out a fixed amount of money - usually at a fixed interest rate - for a period of 15 to 30 years. Payments are due each month until the loan is paid off. In order to take out this type of loan, the homeowner must have some equity left in the home; the equity will serve as collateral for the loan.
2. What is a home equity line of credit?
A: An equity line of credit is a bit different from an equity loan/second mortgage. With a home equity line of credit, the borrower essentially treats the loan like a credit card or checking account. The borrower can withdraw money at will at any time, up to a certain limit as specified in the loan documents. However, it is similar to a home equity loan in the sense that the lender requires collateral for the loan in the form of home equity.
3. Which should I choose?
A: If you know how much you want or need to borrow against the equity in your home and need it all in one lump sum, you should consider the second mortgage option. However, if you believe you will want to borrow a little bit at a time, as needed, go with the home equity line of credit.
4. How do I apply if I have a bad credit score?
A: Many home equity lenders will turn you away if you have a bad credit score. However, there are specialist lenders who work with people who have bad credit. Seek out "bad credit home lenders" in order to qualify.
5. What factors can help me increase my chances of getting a good deal on my loan?
A: Bad credit equity lenders are able to look at various elements of your credit history in addition to your credit score. They also take into account information such as your current income and employment status. If you are someone who is generally credit-worthy, then even if you have a low credit score then you should be able to qualify for a loan.
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