Few people are immune to the necessities of needing a large amount of money unexpectedly. Perhaps an emergency has arisen and a large amount of money is needed to meet the crisis. It could be that you want to renovate your home, take a lavish vacation, make an investment or could be any number of different things, but one thing that is true about all the situations is that they will typically require a lot of money.
Unfortunately, not everyone has large amounts of money sitting around waiting to be used. In these cases, a person will need to investigate the various different ways they can get a hold of the money that they either need or want.
While there are many different types of loans available to those that need them, there is one type of loan that only a homeowner can get and that’s a home equity loan. Being a homeowner isn’t the only criteria that you have to meet, you also have to have equity in your home to qualify for this type of loan.
A major benefit to an equity loan is that they are typically easier to get than a traditional loan. Even if a homeowner doesn’t have stellar credit, a large amount of equity can compensate for a poor credit score. That doesn’t always mean that people with very low credit scores will qualify for sweetheart home equity loan rates, but it does make the process of being approved for a loan much better when you have a great deal of equity in your home.
Somebody looking at traditional lending will have a difficult time if they have bad credit. In fact, with as tight and as the lending market has become after the economic downturn, it’s virtually impossible for someone with bad credit to get a traditional loan for things such as renovations, repairs, vacations or investments.
Whether you have great credit and can qualify for a standard home equity loan or you have horrible credit and your loan ventures into the bad credit home equity loan area, this is one of the few ways you can get a large sum of money in a relatively short period of time without too many difficulties. However, there are a few things to consider when taking out this type of loan.
Know the Going Rate
The first thing you want to consider are the going rates for loans based on your home’s equity. In most cases, home equity loan rates will fall anywhere from 2.5% to as much as 7%. The difference in the interest rate has everything to do with geographic location, the bank or lending institution that you’re looking to secure the loan from and the fees that are charged for each loan. Typically, the higher the fees are, the lower the interest rate will be.
Other things that can affect the interest rate for an equity based loan is the amount of equity that a homeowner has and their credit score. There’s no question that a poor credit score is going to hurt your chances of getting one of the lower interest rates.
In reality, a poor credit score is going to drive your interest rate up to the 7% mark, or even higher if you live in an area with higher rates. However, the more equity you have, the better your chances are of getting a loan, even if your credit score is very low.
There are obviously going to be situations where a lending institution will be unable to work with somebody regardless of the equity because of their credit score. However, this is largely the exception rather than the rule, even with today’s stringent lending industry.
Where to Get a Loan
Once again, this will greatly depend upon the lending institution, the particular amount of equity the owner has in the home and the owner’s credit report. Some banks offer exceptional rates and some banks don’t offer very good rates all.
There doesn’t seem to be any rhyme or reason for this outside of perhaps a lending institutions exposure to past loans that have defaulted. The higher the exposure, the higher their rates are going to be and the more requirements will be in order to secure these loans.
With so many lending institutions offering these types of loans, one of the best ways to find an equity-based loan is to use online comparison tools. This is perhaps the most convenient way to find and compare various equity loans that banks and other lending institutions offer.
The Loan Comparison Process
The process is actually very simple. You will visit one of these comparison websites, input some basic information, submit that information and almost immediately you will get responses from three to five, and in some cases, more lending institutions offering you equity based loans. You can take these loans, compare the fees, compare the home equity loan rates and make a decision as to which one offers you the best terms for bartering your homes equity for cash.
Take Your Time
Lastly, you want to do is to proceed with caution. You have to understand that this money will need to be paid back and the consequences of not paying back could be severe. You could end up losing your home, destroying your credit as well as involving yourself in legal civil disputes. Equity loans are an excellent way to get large amounts of money that certain situations call for. However, in order to do this properly, you need to proceed with caution, find the loans with the best terms and ensure that you have the mans to repay your loan.
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