Poor Credit Home Equity Loans - What are Your Options
0 Comments Published March 29th, 2008 in Home Equity Loans.
If your credit is less than perfect, you probably think that it is
impossible to get approved for a home equity loan. However, thousands of
people with poor credit are able to get loans. Because home equity loans
are secured loans, lenders are willing to offer money to those with bad
credit. There are several options available to those looking to get a
home equity loan.
Pros and Cons of a Home Equity Loan
There are various reasons to get a home equity loan. However, there is
one important reason not to get one. For starters, home equity loans
are ideal for people who are hoping to consolidate their debts and
eliminate unnecessary expenses. Home equity loans have a low percentage rate,
but a shorter term than most first mortgages. The monthly payments on
home equity loans are very low. Those who use the loan to consolidate
debt are able to get out of debt by spending less money each month.
The downside side to home equity loan is that these loans are secured
by your home. If you are unable to maintain regular payments, the lender
who granted your loan may foreclose your home. Thus, it is vital to
carefully evaluate your money situation. If you are not confident in your
ability to repay the home equity loan, avoid applying and accepting a
loan.
How to Find a Home Equity Loan Lender?
If you have poor credit, finding a good home equity lender may be
challenging. Nonetheless, it is possible. As you begin your search, contact
your mortgage lender and inquire about their home equity rates. Most
home equity loans are fixed rate mortgages. Thus, your monthly payments
are predictable. If your lender offers acceptable terms, request a
quote.
Along with requesting a quote from your mortgage lender, complete a
quote request with an online mortgage broker. Broker companies will help
you find the best lender. If you have bad credit, your best option is to
choose a sub prime lender. These lenders offer the best home equity
rates for individuals with a low credit score. By using a broker, you will
receive at least four offers from various loan lenders. Quotes will
include rates, terms, and loan services. You pick the home equity loan
package with the best rate.
Here are our recommended
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Guide, an informational website about various types of loans.
Debt Consolidation, with Home Equity Loans
0 Comments Published March 28th, 2008 in Home Equity Loans.
Debt consolidation is a way of increasing your monthly cash flow by combining all your high interest payments into a low interest and easily manageable home equity loan. The process is explained in the example.
Lets look at this example:
Your credit card loan is $15000 at 18% interest
Your car loan is $18,000 at 10% interest
Your student loan $21,000 at 8% interest
You plan on paying all these off in five years. Assuming interest rates don’t change:
You make a monthly payment of principal of $250 and $45 in interest on your credit card loan. You pay $295 a month.
You make a monthly payment of principal of $300 and $30 in interest on your car loan. You pay $330 a month.
You make a monthly payment of principal of $350 and $28 in interest on your student loan. You pay $378 a month.
After five years of repaying these loans you would have paid $54,000 in principal and $32,400 in interest.
YOUR LENDERS HAVE JUST MADE AN ABSOLUTE KILLING OFF YOU!
Now, lets look at how we can save money consolidating your bills using a home equity loan.
Take out a home equity loan for $54,000 you plan to pay off in five years.
Receive the lump sum of money and pay off all your creditors.
After five years have your loan fully paid off only paying $13,500 in interest.
YOU JUST SAVED $18,900!
How does this work so well?
Home equity loans have extremely low interest rates, usually around 5%! If you put all your bills into one home equity loan, you will make regular low interest payments on what you owe.
This may be considered a double edge sword, but because you use your house as the security to finance the loan, if you cannot make the payments you may loose your house to the creditor. However, this is a very good incentive to pay your bills!
Good debt, Bad debt:
It is important to use debt consolidation to reduce bad debt instead of good debt. Good debt is defined debt that is owed on the purchase of an asset. Bad debt is defined as debt that is owed on the purchase of a liability.
Learn how to increase your quality of life on http://www.use-your-equity.com with the power of home equity loans. Article by John Whiteside!
The optimum word in “home equity loan” is equity. Start with the fair market value of a home, subtract the mortgages (first and second) and any liens against the property, and what you have left is the equity. This equity can be used as collateral to secure cash in the form of a loan or mortgage.
The amount borrowed is based on a percentage of the appraised value of the home. The percentage rate can vary from 75% to 125%. The length of the financing will also vary. The two main types of home equity loans are fixed rate loans and adjustable rate loans.
Fixed rate loan - provides a fixed amount of money at a fixed rate of interest, repayable in equal payments over the life of the loan. Fixed rate financing costs more in set-up fees and comes at higher interest than adjustable rate loans. But if homeowners stay put and interest rates go up, they will save money over a comparable adjustable rate loan.
Adjustable rate loan - the interest rate goes up or down according to the index upon which it is based. Adjustable rate loans will have a cap on how high the interest rate can go. Usually called ARMs (Adjustable Rate Mortgages), this type of loan has lower up-front costs and starts at a lower interest rate than fixed rate financing. This means lower initial monthly payments.
According to the Consumer Banker Association, the top ten reasons for getting a home equity loan are:
10. Vacation
9. Medical expenses
8. Business expenses
7. Household expenditures
6. Investment
5. Major purchase
4. Education expenses
3. Automobile purchase
2. Home improvement
1. Debt consolidation
Debt consolidation, the most popular reason people cash out their home equity, is a smart form of financing because of the money it can save. For example, say you owe $15,000 on a credit card that charges 17% interest. If you get a debt consolidation loan at 9% interest and pay it off in five years, you’ll save over $30,000!
If you’re paying more than 15% interest on anything, you should seriously consider a debt consolidation loan. The right terms could drop your monthly payments by 35% - 50%, depending on interest rates, origination costs and tax consequences.
Even for people who have bad credit or who have filed for bankruptcy, a home equity loan is not out of reach. It can be a good way to make a fresh start. Websites like www.easyhomeequitymortgages.com/ help borrowers with bad credit get the home equity loan that best fits their unique situation.
Mike Hamel is Senior Writer for Sales and Marketing LLC (http://www.salesandmarketingllc.com), an Internet marketing company offering everything from website development and optimization to creating and monitoring cost-effective ad programs. Their specialty is improving visitor-to-sale conversion rates using proprietary software and advanced SEM techniques.
Mikehamel@salesandmarketingllc.com