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Home Equity Loan for Bad Credit in Clearing

It is no secret that bad credit puts you in a tough situation when it comes to qualifying for a loan. If you are looking for a way to secure that loan you need, your home might be the answer. With the value that your house has accrued over time, you might be well on your way to getting that home equity loan for bad credit in Clearing after all. Here is how.

 

Home Equity Loan for Bad Credit in Clearing

 

Banks can lend you bad credit loans in Illinois by using your house as collateral, even if you are in bad credit standing. You can apply for either a home equity loan or a HELOC. It is essential to understand that HELOCs are not home equity loans.

 

A home equity loan is a sum of money given to a homeowner. The money gets repaid over an agreed period with fixed monthly payments. With each payment, the loan gets reduced, and the interests are covered.

 

With a HELOC, you are given a credit line for a certain amount that you can borrow against as needed. HELOCs allow you to withdraw as many times as you want while making smaller payments for many years. However, HELOCs are risky since a lender may cancel the line of credit before you finish the money, thus putting you at risk.

 

Understand Your Debt-to-Income Ratio

Knowing your debt-to-income ratio increases your chances of getting approved and securing lower interest rates. Your debt-to-income ratio is derived by dividing the amount you owe by the amount you make. For a debt-to-income ratio of 40 or less, you can land a sweet deal with most lenders.

 

It is crucial to balance your DTI and your credit score to avoid feeling stretched out every month. If your credit score is high, it will be best to have a higher DTI and vice versa.

 

How High a Credit Score Will You Need?

 

If your FICO score is around 620 or higher, chances are a lender will consider you for a home equity loan. You just need to weigh your credit score against your debt-to-income ratio and loan-to-value. You need to find out how much your house is worth before getting into an agreement with the lender.

 

Alternatively, you can sell the house and rent it back. This is also referred to as cash-out refinancing. With cash-out refinancing, you can take some of the equity out and add it to the new loan.

 

Sometimes, one loan is never enough, especially with the current uncertain times. It is difficult to know when the economy will get back to normal. Consider all the options available for you if you are looking to secure a second mortgage to get you through these times.

 

How It Works

 

Second mortgages are loans on already mortgaged properties that get used as collateral for the loan. If a borrower defaults on the payments, the holder of the first mortgage gets paid before the latter. This puts the lienholder at a riskier position. Additionally, interest rates are much higher.

 

What You Need to Qualify for a Home Equity Loan

 

You would need to present;

 

  • Proof of income with complete details of your work history. This will include the pay cuts and salary
  • A detailed list of your assets, including cars and houses, is also necessary. If you have an already standing first mortgage, you should show your standing on payment
  • List of other debts such as medical bills and credit debts
  • Tax returns from the last two years
  • Bank statements

While not all of these documents will be needed, they will come in handy when trying to convince a lender that you’ve grown responsible in handling money.

 

The Cons of Obtaining Home Equity with Bad Credit Illinois

 

  • Using your home as collateral isn’t advisable
  • You risk foreclosure if you default on payments
  • You are piling on debt that can take years to pay off

 

If you are looking for a lender for a home equity loan in Chicago, Skydan Equity Partners is the home equity solution for you. We are dedicated to providing homeowners with the financial relief they require without piling on their debt.

 

Give us a call today. We will give you the suitable home equity loan alternative for bad credit in Clearing and allow you to get your footing and get back on track.