You can still get a home equity line of credit (HELOC) even with bad credit. Because the line of credit is secured by the equity in your home, lenders are more willing to offer lines of credit to riskier borrowers at rates lower than those of traditional loans or lines of credit.
Home Equity Line of Credit - Bad Credit FAQs
A Home Equity Line of Credit (HELOC) for bad credit is a form of loan that utilizes the equity in your home as collateral to allow you access to up to 85% of the value of your home. It can be used to cover necessary expenses, such as emergency medical bills or home repairs and improvements.
Yes, it is possible to get a HELOC with bad credit, although you may have less favorable terms than someone with good credit would receive. Your lender will likely require additional documentation and may ask for higher interest rates and fees.
With any form of loan, there is always risk involved in taking out debt. A HELOC is no different. Depending on your individual circumstances and credit score, you may be offered higher interest rates and fees than someone with good credit. Additionally, if you cannot make payments on time or default on the loan, your lender may foreclose on your home to recoup their losses.
A loan is typically a lump sum whereas a line of credit is typically revolving which allows for the borrower to draw, repay, and again draw as needed.
If you are denied for a HELOC with bad credit, there are still other options available to you such as taking out an unsecured loan from a bank or applying for a secured loan backed by collateral such as property or a vehicle. Depending on your individual circumstances, these loans may come with more favorable terms than what is offered through a HELOC.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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