Home Equity Loans: Debt Consolidation Solutions for People with Bad Credit
Repaying your debts can be tough. As well as managing multiple payments to a number of loans and credit cards, keeping track of the interest rates that you are paying can be tricky. And, your repayments may be at a level where you’re finding it difficult to meet your commitments every month.
If you’re looking for a better way to manage your debts, a home equity loan could be the perfect answer. Home equity loans allow you to borrow against the equity in your home and use the cash to consolidate your other debts.
And, if you have bad credit, a home equity loan could be the ideal solution.
Advantages of Home Equity Loans to Consolidate Debt
If you are a homeowner with equity in your property, a home equity loan allows you to borrow some or all of this equity. The lender takes your home as security and you pay the loan back over a term of your choosing.
As the lender takes a legal ‘charge’ over your home as security for the loan, they are much more likely to get their money back than with other types of borrowing such as unsecured loans or credit cards. This means that the interest rates on home equity loans are often lower than other forms of credit.
If you are paying high-interest rates to other creditors, a bad credit home equity loan allows you to consolidate all these debts. You can potentially pay a much lower rate of interest on your borrowing and you’ll make one simple, affordable monthly repayment.
If you have bad credit – perhaps you have a County Court Judgment or a default – then a home equity loan can be the perfect way of consolidating your debts. Lenders are often reluctant to agree unsecured loans to people with poor credit whilst home equity loans are widely available because the lender has your home as security for the loan.
In addition, a debt consolidation home equity loan can simplify your home finances. Instead of making lots of small payments to multiple creditors, consolidating your debts means you are left with one monthly repayment and one direct debit.
Disadvantages of Home Equity Loans to Consolidate Debt
If you have a less-than-perfect credit file, you are a riskier proposition for a lender. When they agree to a home equity loan for you they will generally do so at a higher interest rate than they would for someone who has a completely clean credit history.
If you took out your loans and credit cards before your credit deteriorated, you need to carefully compare the interest rates you’re paying on those debts against the rate you will be charged on your bad credit home equity loan. Make sure you’ll save money before you sign up.
Another disadvantage of a home equity loan is that by consolidating personal loans, credit cards or store cards you are securing previously unsecured debts. If you don’t make payments to unsecured debts, a lender has no collateral to repossess and sell. They have to pursue you through the courts for payment.
When you take out a home equity loan your home is at risk if you fail to keep up your repayments. Not paying your loan has much more serious repercussions than an unsecured debt.
Consolidate debt with bad credit
To access the money tied in your home equity and get a great loan rate, book an appointment with the Mortgage Genie.