What You Need to Know About Bad Credit Home Equity Loans
Owning a home in Edmonton can leave you cash-strapped, especially if you change employers or are forced to respond to an unexpected financial obligation. Perhaps, after struggling to meet financial commitments, you have applied for a loan only to be turned down. In these cases, Bad credit home equity loans may be a good solution for you, but there are some things you need to know.
Two Options for Bad Credit Home Equity Loans in Edmonton
When you take out a bad credit home equity loan in Edmonton, you are borrowing the difference in the value of your home and the balance owing on your principal mortgage, less 20-percent. In other words, if you meet the necessary criteria, you can borrow up to 80-percent of this value. When you do this, you are offered two options: a fixed rate loan, or a home equity line of credit (HELOC). The following will explain the differences between the two.
Fixed Rate Bad Credit Home Equity Loans
With fixed rate loans, you are lent a lump sum based on the eligible value and the amount you require. Your agreement includes a fixed interest rate for the duration as well as regular payments to be made over a pre-determined period.
Home Equity Lines of Credit
A HELOC operates like a credit card or revolving credit account. You are given a set amount that you can draw from as required, but the interest rate is variable. This provides you with flexible payments and access to cash when needed. HELOCs are often used for short-term costs that can be paid off quickly.
Understanding the Risks of Bad Credit Home Equity Loans
Bad credit home equity loans can be the hand-up you need to get your financial situation back under control, but they must be handled properly. Borrowing against the value of your home can be a dangerous game if you don't change your spending habits or work to improve your situation.
For example, if you pay off your high-interest loans but continue to spend more than you earn, you will eventually fall into debt again. At this point, you will have your credit payments, your principal mortgage payment, and your home equity loan payment to make with no other means of borrowing. Failure to make payments on your home equity loan can result in you losing your home. However, if you use the loan to pay off your high-interest debts and focus on getting your finances under control, it can be a whole new beginning and you could greatly improve your credit.
BMC Mortgage & Investments is more than just your average Edmonton bad credit home equity loans lender- we help you gain control of your finances with solutions customized for you. Contact us today to learn the best options to improve your life.