Bad Credit HELOC Loans

People with bad credit are often leery of applying for home equity line of credit (HELOC) loans. This is because many of them assume that they can’t get HELOC loans with bad credit. However, this is not necessarily true. While there are definite consequences that come as result of taking out bad credit HELOC loans, the fact of the matter is that the most important factor in a home equity line of credit loan decision is how much equity you have.

Equity: a definition

Many people have a vague idea of equity, but do not really know what it is. Simply put, equity is the amount of ownership you have in your home. It is the difference between how much money the home is worth, and how much money you still owe the bank. For example, if your home is worth $165,000, and you still owe $95,000, the amount of equity you have is $70,000 ($165,000-$95,000). So, when it comes to getting a home equity line of credit, you can usually borrow up to about $70,000.

Bad credit HELOC loan

If you have bad credit, though, there are a few extra ground rules when it comes to HELOC loans. First of all, you should understand that you may not actually be allowed to borrow the full amount of the equity in your home. While you probably will be able to, some of the more conservative lending institutions will not loan you the entire amount of your available equity if you have a poor credit score. And, of course, no matter how much you are lent, you will most likely pay a higher interest rate than you would if you had good credit. You should also be aware that bad credit HELOC loans are often harder to get fixed rates for. You are more likely to be required to get an adjustable rate home equity line of credit if you have bad credit.

Watching out for borrowing more than your equity

Some lenders will actually give bad credit HELOC loans for more than the amount of the equity in the home. This is done on the assumption that your home will increase in value and so the amount of the loan will be covered. However, you could be stuck if your home doesn’t increase as much as the lender thinks. If you sell the home, you may still owe money, and that can be a difficult situation. Additionally, you might be stuck making higher monthly payments than you can afford, due to the larger amount borrowed. This can lead to foreclosure. You should be careful of getting a HELOC loan from a lender that pressures you to borrow more than your home is worth.

Using a Home Equity Line Of Credit To Repay Credit Card Debt

Two financial phenomena have taken place in the UK over the last decade. On the one hand, we have increasing become a nation of debtors, running up trillions of pounds in short-term debt. On the other hand, house value have increased exponentially during this period and many of us now have massive amounts of in-built equity value in our homes. It may seem natural, therefore, to use the proceeds of one to pay off the debts of the other. However, using a home equity line of credit (HELOC) may not be the best method of debt consolidation available to you.

What is a HELOC?

Essentially HELOC is exactly what it says it is. As a homeowner you have an asset – you home. Because housing prices in the UK have increased dramatically in the past decade, many of us have positive equity in our homes. To repay outstanding debt, you can free up some of this equity with a loan, against which you provide security – your home. You have now just completed a HELOC.

Why is this a good way to consolidate my UK credit card debt?

Many see HELOC as a good way to consolidate their UK credit card debt because, as a secured debt, the interest rate on the loan is much lower than the interest rate they’re currently paying on their existing outstanding unsecured credit card debt. In addition, the repayment terms of the consolidated debt may be more affordable, i.e. the monthly repayments may be lower.

Why is this a bad way to consolidate my UK credit card debt?

There are essentially two principal reasons why HELOC may be considered a bad way to consolidate your debt. On the one hand, and very importantly, if you elect to consolidate your debt using a HELOC, you need to be aware that you are literally gambling with your home. If you fail to make repayments under the line of credit provided to you, as a secured loan, you stand to lose your home. Consequently, this can be seen as an extremely risky way to pay off unsecured debt, against which a claim against your biggest asset – your home – would be far more remote.

The second reason why HELOC are seen as not being a particularly good way to consolidate credit card debt is because, unlike in the past, there are now other alternative methods that credit card debtors can use to try and consolidate and pay off their credit card debt. Examples of this may be the unsecured personal loan or even the 0% interest offered as a promotional incentive to transfer your credit card balance to another UK credit card provider. In short then, HELOC are seen as an extreme measure to a short-term problem.

Having said there are two principal reasons why HELOC is seen as a bad way to consolidate credit card debt, there is in fact a third reason. In most cases credit card debtors use HELOC as a short-term measure to consolidate their credit card debt. Most credit card debtors who consolidate their debt with HELOC financing do not cut up their credit cards, rather, shortly thereafter, the credit card debtor will have run up another line of credit against their credit card. To repay this line of credit the homeowner will arrange another line of credit against the residual equity in their home. Before long, the home no longer has any residual equity left, the homeowner has a number of loans they need to repay, and another line of credit remains outstanding on their UK credit card. This type of financial mismanagement is all too easy to do today, but it coffin nail to your long-term financial future, so think long and hard before using a HELOC to consolidate your UK credit card debt.

No Doc Equity Loan and No Doc HELOC Loans - No Income Verification Required

A "No Doc Equity Loan" or "No Doc HELOC Loan" is a unique and advantageous mortgage refinance product that allows people, who do not want to provide the traditional full stack of supporting documentation that goes along with the mortgage loan process, to their lender.

Consumers like No Documentation Equity Loans and HELOC Loans, because they expedite the loan process and make the refinance process a lot less stressful. The second part of a no doc equity loan product is that some lenders also provide a feature called no income verification or stated income. This means that you indicate your income (say $3000 per month) but the lender does not verify the information with pay stubs, W-2 forms, etc.

Lenders vary in the loan products that they offer. Some lenders only cater to people with excellent or good credit scores and they also only offer traditional mortgage loans. Other lenders specialize in working with people with bad credit scores and offer a large variety of loan programs.

If you are looking for a No Doc, No Income Verification refinance loan, you will need to find the "right" lender. Start your research by getting at least three or four mortgage loan quotes - at no cost. You should not have to pay for this service.

Once you find the lender of your choice, compare loan terms, including the amount the lender can offer (e.g. $250,000), interest rates, type of loan (ARM, Fixed, etc) and points. You will have to pay a slightly higher interest rate for a no documentation loan than for a full documentation loan.

Research recommended no doc equity loan lenders at the loan resource guide: http://www.kstreetloans.com

Sharon Listner writes about finances and conducts in-depth analysis on various consumer loan products including mortgage loans and personal loans.

How to Convert To a Fixed Rate HELOC

Folks who currently have a home equity line of credit (HELOC) may be feeling a bit of a pinch at today's rising interest rates. HELOCs are adjustable-rate loans, meaning the interest rate you pay changes depending on a certain index (usually Prime Rate). And these days, rates are increasing, which means the cost and minimum payments of most HELOCs are increasing, too. Fortunately, most HELOC borrowers can convert their loan to a fixed rate. Here's how:

Refinance Your Home

One option available to many HELOC borrowers is to refinance their home for a larger amount than their current mortgage, and using the additional borrowed money to repay the HELOC. By choosing a fixed rate refinancing mortgage, you essentially turn your HELOC balance into a fixed rate mortgage loan. This is a great choice for folks who should be refinancing their home anyway, such as anyone whose mortgage interest rate is higher than the current rates on the market.

Convert it into a Home Equity Loan

Unlike a HELOC, a home equity loan usually pays out the cash in one lump sum--and the rate is often fixed. Some HELOC borrowers may be able to convert their HELOC into a fixed-rate home equity loan. Although you will no longer be able to draw off the balance, you will get the current low-rate locked in for the life of the loan. Check with your HELOC lender to see if this is an option for you.

Get a New Home Equity Loan

If you are unable to convert your HELOC into a home equity loan through your current lender, you may be able to obtain another home equity loan. If so, you can use the money you borrow to pay off your HELOC in a do-it-yourself conversion of HELOC to home equity loan. Search for lenders willing to work with you by checking local banks and online loan companies.

If you currently have a HELOC, you're not stuck with a rising adjustable interest rate. There are numerous options that can help you drop your HELOC balance to zero and switch the balance to a less expensive, fixed rate loan.