A home equity loan may be just the thing you need to get you out of a sticky financial situation. But, what do you do if you have a low FICO score – say, one under 600?
If you are looking for home equity loans for people with bad credit, here are 5 tips to help you get funded faster:
1. Have an intended purpose for the money you want to borrow:
If you are like most people who want to borrow money against their home’s equity, you probably just have a vague sense of how much you want to borrow – and how you intend to use the money. Sure, there may be one particular expense that you would like your loan to cover, but beyond that you just want a little extra.
When possible, do your best to map out exactly how much you need and how you will spend it. The wisest choice for spending your loan money is often through the paying down of high-interest credit card debt or paying off medical bills. However, ultimately you may use your home equity loan money for anything you like.
2. Get a sense for how much equity you have in your home now:
Either have a formal appraisal done on your home or just ask a realtor friend to provide an MLS listing-based estimate of what it is likely worth (based upon equivalent or similar homes in the area). Either way, once you have a sense of the value, you can determine whether you have equity in your home. As long as you owe less than it is worth, you should be able to find a lender willing to extend you a loan.
3. Do what you can to raise your credit score as much as possible:
Now, if you have the time, take steps to improve your credit score. Start by reviewing your most recent credit report. Then, look for any mistakes that might be removed in order to improve your score.
4. Be sure you are contacting the right home equity lenders:
You will not want to approach 90% of home equity loan lenders out there, given your credit score. Rather, you should directly contact 4 or 5 of those that bill themselves as “bad credit home equity lenders.” These are the ones who will look past your credit score, finding instead other ways to judge whether and how you are credit-worthy.
5. Spend a little extra time applying to as many lenders as you can:
It just takes about 30 minutes or so per lender you apply to – at least to fill out the initial application. Therefore, spend some extra time applying to as many lenders as possible. Even if you get an offer from the first lender you apply to, go ahead and follow through by applying to the rest of the ones on your list. This is a best practice that can help you land the best interest rate on your home equity loan.