you're in a situation where you need to take out some the
equity in your home, but traditional lenders/banks are rejecting
your application - this article will clearly describe your
are some examples of situations that might require a home
equity loan when you have bad credit:
Your home is in need of much needed repairs
You would like to put in a suite in your home thereby
creating rental income
Youve come across a real estate or business opportunity
too good to pass on
Youre facing a short term cash crunch due to
illness or job loss
Due to an illness or job loss youve amassed a
bunch of credit card debt and the payments are killing you
Your business needs a short term cash injection
You need money to pay the government back taxes that
you owe them
You need money to continue a legal action that will
result in a large cash settlement, but you need the money
to help you get to the finish line
this situation - where you have bad credit and need an equity
loan - they are private lenders and not the banks. These folks
lend primarily to those with less than perfect credit.
not all private lenders are created equal, if you are mortgage
shopping and you have bad credit, watch out for the predatory
mortgage lenders who will gouge you! You cant expect
with less than perfect credit to get great rates but in spite
of bad credit, within this lending community there are some
norms when it comes to fees and rates. In order
to find out what those are, make the calls and do your homework
upfront to ensure that you end up with what is fair in the
these types of lenders can arrange a home equity loan for
single family homes, commercial property, construction projects,
developer lots, raw land, unimproved & improved property
of all types. They do outside the box lending.
it comes to the home equity loan their focus is primarily
on both the collateral and the fundamental value of the real
estate in question, in other words with private lenders your
equity is the key to the deal. They are typically very creative
and usually act quickly. Their home equity loans are generally
interest-only loans thereby making the payments more manageable.
of them dont generally have any kind of a minimum credit
score requirement, and most if not all generally lend anywhere
between 65% to 75% of loan to value, now Ive heard of
some going as high as 85% but this is the exception certainly
not the rule! They will lend in first, second and even third
position in some cases so long as the loan is structured within
their loan to value guidelines. In most cases these folks
work with mortgage brokers and form part of a mortgage brokers
dont care what you do with the money, most of the banks
and credit unions and trust institutions want to know how
and what youre planning on doing with the money but
not private lenders. What they will care about however is
how their funds are going to be repaid back, so in this regard
they act very much like a mainstream bank - they are in the
business of lending money not having to chase after it!
prepared to pay more in interest rates, these home equity
loans are more expensive than the traditional ones because
they are not based upon traditional credit guidelines which
protect the banks from high default rates. Because private
lenders dont usually ask for the documentation and income
verification that typical lenders do, they experience higher
default rates (and, thus, charge a higher rate of interest).
addition there may also be lender fees, brokerage fees and
legal and appraisal fess which you will also have to pay.
But as mentioned before ensure you shop around and clarify
all of these costs upfront before signing thereby avoiding
any unpleasant surprises!
This - And Save Thousands...
sure you can make the payments! Now many of you are thinking,
who would be crazy enough to go into debt not knowing if they
can or cant afford to make the payments you would be
surprised! In fact a fair amount of borrowers who get into
trouble do so because they dont have a monthly budget!
Thats right, its not only this one payment you
have to worry about, its all of the rest of your financial
obligations. Surveys and studies have proven that more than
80% of individuals today dont have a monthly operation
budget, thats like driving at night without headlights!
So before you borrow the money, make the budget! You dont
want a financial wreck.
a clearly defined exit strategy. Now I know that you dont
want to pay the typical high interest rates that these loans
come with forever, right? Thats why these loans should
never be viewed as anything other than short term due to the
interest rates, there should always be an exit strategy going
in. So whats yours? Whats going to change during
the term of this loan thats ether going to allow you
to pay it off completely or get it refinanced at normal rates?
are things that need to be clearly established before you
move ahead with a private loan.