Apr
28
Home Equity Loans for People with Bad Credit - Reasons for Getting a Home Equity Loan
April 28, 2007 |
Home equity loans allow people with bad credit to access relatively cheap credit. By tapping into your home’s equity, you can afford to do home repairs or pay for college. Home equity loans can also help you get out of debt sooner by consolidating your bills. And in some cases, interest from your home equity loan is tax deductible.
Cheaper Type Of Credit
With the equity of your house as security, a home equity loan provides you with one of the cheapest types of loans. With poor credit, credit cards rates can be 20% or higher. Unsecured personal loan rates can be just as much. But sub prime home equity rates are 1% to 8% higher than conventional rates.
Many people decide to use their equity to pay for large expenses, such as home repairs or college bills. You can also pick a home equity line of credit, which allows you to borrow against your equity much like a credit card account.
Consolidate Other Bills For Lower Rates And Payments
A home equity loan can help you get out of debt sooner by consolidating your bills into one payment with a low rate. Trading in your high interest credit card bills for a low interest home equity loan can save you hundreds a month.
When you select your second mortgage terms, you can negotiate loan terms. You can target your loan’s length to the payment amount. This means that for the same monthly payment you have with your bills now, your loan could be out of debt in less than five years. Of course, you can choose a longer period for smaller monthly payments.
Interest Can Be Tax Deductible
In some cases, home equity loan interest can be itemized on your taxes. If the principal was used to make home repairs, then the interest qualifies. But check with the IRS before including it on your taxes.
Under the right circumstances, a home equity loan can be a valuable tool. However, make sure you do your research on lenders before signing any loan contract. A few hours spent researching rates and fees can save you a real bundle.
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