There are several possible reasons why you may be considering a home equity loan. For example, you may have recently come into a situation whereby you need cash to pay for a large, unexpected expense. Maybe you need to pay down some high-interest credit card debt. Or, maybe you want to do some home improvements, help the kids with college, or take a little vacation.A home equity loan – also called a second mortgage – is simply the taking out of a loan against the equity in that home – meaning, the equity is used as collateral. In this case, equity is defined as the portion that you actually own. This is calculated by subtracting the outstanding loan principal from the appraised (or estimated) value of your home. These loans are fairly easy to secure, especially if you have a strong credit score.Things can feel a bit more complicated, however, if you have a bad credit score of under 600. In this case, it can be difficult to qualify for the loan you want.If you are looking for bad credit equity home loan refinancing, here are 5 tips to get you started:1. Decide how much you would like to borrow:Start by figuring out exactly how much you would like to borrow. Take into account the one or more ways that you plan to spend (or invest) the loan payout. But, make sure that you do not borrow more than you need, since there is no reason to make interest payments on money you never needed.2. Understand what an LTV is:As you dig a bit deeper into home equity loans, you will come across the term “LTV” or loan-to-value. This is usually stated in a way such as 70% LTV or 80% LTV. This simply refers to the maximum amount (offered by that particular lender) that you can borrow, when taking your first mortgage into account. For example, if your home is worth $100,000 and your current mortgage loan balance is $60,000, for a 70% loan-to-value loan you can borrow up to $10,000, since: ($100,000 x 70%) – $60,000 = $10,000.3. Decide how much you can likely borrow:Based upon the type of loan (in terms of loan-to-value) for which you would like to qualify, calculate the amount you will be able to borrow under that loan. Now, compare that number to the amount you would like to borrow (from #1 above) and make sure you can qualify for enough money to meet your needs.4. Understand how your credit score comes into play:Realize that your credit score is an important factor in determining whether you are approved, but it is not the only one. In fact, if you seek out bad credit home equity lenders, you will find that these lenders look into other factors apart from the credit score. Still, it is a good idea to run your credit report before approaching lenders, just to see where it is.5. Apply to at least 3 lenders:Now, it is time to start applying. Make sure that you apply to multiple lenders – at least 3. That way, you can cover your bases and make sure you are getting the best deal for yourself.Take these 5 tips into account as you get started in taking out a bad credit home equity loan.
