Homeowners know how valuable equity in their homes can be. They work hard to maintain their home and when it is necessary to take out a loan, they expect the process to be simple. However for some homeowners, it is not that simple, it can be absolutely frustrating.As everyone knows, being approved for a loan is contingent upon your credit history. However, if you have less than perfect credit it can lead to a denial by your lender. A home equity loan is a loan that you take out against the equity that you have built up for your home. It can be used for anything you want, a vacation, education, or home repairs, or even the bills that caused your credit rating to plummet to begin with.
One of he disadvantages to a bad credit home equity loan is that it is set up differently than traditional loans. With a home equity loan, the homeowner uses the home itself as collateral for the loan. This covers any risk to the lender. This type of loan also has a repayment period; if the loan is not paid off within this period of time, the homeowner risks losing his or her home. The upside is that the homeowner can borrow up to eighty-five percent of the value of their home.Another disadvantage to a bad credit home equity loan is that the interest rate will be much higher than with a traditional loan. This is because it is perceived that the risk to the lender is much higher with a person who has bad credit.And advantage to a bad credit home equity loan is that it is available to homeowners who do not believe that they could get a loan.
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