Posted: 1 May '18

Is it Possible to Get a Home Equity Loan with Bad Credit?

If you're a homeowner with blemished credit, a home equity loan can be a great way to tap into the equity you've built up in your home. The loan can consolidate your debts and increase your monthly cash flow. But while this type of loan is typically easier to get approved for than traditional loans and lines of credit, owning a home doesn't guarantee you'll be approved for financing. Having judgments, defaulted credit accounts, and high credit card balances on your credit report can affect the interest rate you're able to obtain -- or even whether you get approved at all. The good news is that while getting approved for a home equity loan with bad credit can be challenging, it's not impossible. Here are a few ways you can improve your chances of being approved for a home equity loan with bad credit.

Improve Your Credit Score

The lower your credit score, the more of a risk you are deemed to be by banks and other prime lenders. Before applying for a home equity loan with bad credit, eliminate your credit card balances and pay off any defaulted accounts. You can also try contacting your creditors to get late payments removed from your credit report. Many companies will do this as a courtesy for long-term customers whose accounts are in good standing. Another way to improve your chance of getting approved for a home equity loan with bad credit is to correct any errors you find in your credit report.

Consider a Cash-Out Refinance

For many homeowners who are unable to get approved for a home equity loan with bad credit, a cash-out refinance is an alternative that is often easier to qualify for. Unlike a home equity loan, which is a separate loan secured by the equity in your property, a cash-out refinance replaces your current mortgage with a new one, allowing you to convert up to 80 percent of the property's value into cash.

Work with a Mortgage Lending Specialist

Working with a mortgage specialist can help you get approved quickly for a home equity loan with bad credit. Since mortgage brokers maintain professional relationships with a wide range of lenders, they have access to literally hundreds of special loan products, deals, and discounts that aren't available to the general consumer. A mortgage specialist also knows how to put together an application that will get you approved for financing at the best possible rate.

Getting the financing you need with bad credit isn't impossible if you take the above steps to prepare an attractive loan application. Contact a mortgage specialist today for more advice on how to obtain a home equity loan with bad credit.

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