Bad credit is like a bad infection. It slips into your life and spreads into every aspect. Once it takes hold you can’t get a good interest rate on credit cards, mortgages, car loans or even home equity loans. It’s pervasive and disheartening and, ultimately, leads to getting bad credit home equity loans; which is almost always a bad idea. Home equity loans for people with bad credit can put your house in an insane position in terms of credit.
Many people choose equity loans because of their low interest rates. Because of its low interest rate, equity loans or credit lines are chosen to do home improvement, pay for college tuition and even buy a car. The low interest rates are normally universally lower on a home equity loan because the home is served as collateral. A second home mortgage is still risky; however, it’s generally less risky than other types of loans. A home is the most important part of a person’s life, so there is a lot more incentive to pay a home equity loan on time. But a home equity loan with for people with bad credit isn’t low interest and it isn’t less risky, it’s more risk. As it’s more risky the interest rates are higher and so are the fees.
Your home is your dearest property. Putting it in jeopardy with a bad credit home equity loan is a bad idea. The interest rates are incredibly high and can snowball into late payments and the eventual foreclosure of your home. While that may seem exaggerative, it’s not just a worst case scenario. Many families lose their homes through bad credit lending. Sometimes the foreclosure is because the lending practices are predatory, but sometimes it’s because the smallest miscalculation can create a problem with finances.
A bad credit loan has such high interest that the monthly payments are excruciating. It becomes a struggle to keep up. There are alternatives to a bad credit loan, if one is willing and able to Crazy Interest – Auto Refinance Bad Credit.
Repairing credit is the single biggest way to reduce the risk associated with bad credit equity loans. A simple 1% reduction in interest can save as much as $25,000 over the life of a loan. And with the credit of many people being adversely affected by the recent economic meltdown, more and more ways of repairing credit are appearing. There are credit counselors that work with your debtors to create a time line of repayment in full. They usually can reduce monthly payments to one single payment.
There are government programs designed to teach people how to manage their money and repair credit. And lastly there are secured credit cards to prove to creditors you’re able to make timely payments on a revolving loan. There are a lot better options than taking out a bad credit home equity loan.