Bad credit home equity loan contracts are to be entered into cautiously. In order to attract clients, many lenders make attractive offers with competitive rates and appraisal percentages of the house. Furthermore, in order to ensure their own safety, lenders include terms that can be unfavorable to you. A well-written bad credit home equity loan contract helps you defend yourself from treachery.Bad credit home equity loan contracts should necessarily include all the terms and conditions of the loan. The interest rate, whether it is adjustable rate mortgage or fixed rate mortgage, has to be specifically stated in the contract. The nature of the loan, as to whether it is a standard equity loan or home equity line of credit, has to be clearly mentioned. In the case of home equity line of credit, the maximum credit amount and regulations about the credit account have to be clearly mentioned in the contract.The rights of consumers in a loan transaction are protected by the Home Ownership and Equity Protection Act of 1994. The law insists that the lender must disclose all applicable loan terms to the borrower. Terms such as balloon payments, negative amortization, and unreasonable penalty rates are prohibited by law. If any of these terms are present in the contract, then the contract will not be enforceable.An advance copy of the contract has to be handed over to the client at least three days before the date of signing of the contract. It is wise to consult an attorney for expert guidance. The contract should not include any clause that could be violated unilaterally by the lender. A checklist should be kept to compare the offered rates and the written rates in the contract. A client also has the right to rescind the contract within three days after signing, if it contains any unenforceable clauses.Bad credit customers often find it difficult to locate a suitable deal. It is advisable that you do extensive shopping to find a reasonable lender and make careful evaluation of the contract benefits before finalizing a bad credit home equity loan contract.