16 Feb, 2021
home equity loan solutions for bad credit

Getting A Home Equity Loan With Poor Credit? Yes You Can!

Is there an easy way to get a home equity loan if you have bad credit?

Will a low credit score allow you to pull equity out of your home and use it for home improvements, a family vacation, or your daughter’s wedding?

Can you get a home equity loan with a 500 credit score?

The answer to all these questions is Yes! You can qualify for home equity financing even with less-than-perfect credit, and the process doesn’t always need to be so tangled if you’re curious to see how just follow our post. We’ll show you why (despite what many homeowners think) getting a home equity loan when dealing with bad credit can be less challenging if you’re working with the right mortgage broker and the best private lenders in Vancouver.

Can bad credit or a lower credit score make it harder for a homeowner to qualify for a home loan?

For sure, it can, especially when working with direct home equity lenders. You might have to deal with lengthy approval times, higher interest rates, or lower lines of credit, but that doesn’t mean you don’t have any other options other than accepting low home equity offers.

With the right advice and guidance, getting a home equity loan with bad credit can also be done on your terms. Even if you have been told “No” by every high street bank, we will work with you to help you get the loan you need, and most importantly, with the best interest rate for your particular situation. Working with banks and credit unions can complicate any borrower’s life. Our private lenders in BC may be able to help any homeowner get a fast and hassle-free second mortgage or a home equity line of credit.

Home Equity LOC & Home Equity Loan General Guidelines

If you’re looking to get a home equity loan but have bad credit, there are a few things to consider before applying with A-lenders.

Except for requiring a credit score higher than 620, banks will also want to check your loan-to-value ratio, debt-to-income ratio, and your proven ability to repay the loan. To get a better understanding of what all these criteria mean, let’s analyze each one of them separately:

  • Credit score – Having a good credit report is an essential factor for banks to approve both home equity loans and home equity lines of credit. Your credit score is calculated by taking into account aspects like your debt and monthly payment history, the amounts owed, length of credit history, or the variety of credit lines opened like credit cards or personal loans. Usually, the highest weight will be placed on the amount of loan you own and whether you’ve been paying your debt rate in time. The amount of loan owed and your payment history will account for about 60-65% of your entire credit score.

So when it comes to getting a home equity loan, what exactly does bad credit mean?

Having bad credit means you probably made some mistakes throughout your credit history, and you now have a credit score of under 620. This low credit score could have been caused by many factors such as being repeatedly late with mortgage installments, skipping credit card payments, having already used more than 30% of your credit limit, or having had a past bankruptcy.

  • Loan-to-value ratio – a loan to value ratio is the difference between what you owe on your mortgage or your loan amount and your home’s value and determines whether you have enough equity in your home to qualify for the best bank rates.  
  •  Debt-to-income ratio – the debt to income ratio is represented by your gross monthly income divided by your entire monthly debt payments. A debt ratio more significant than or equal to 40% will generally qualify you as a high-risk borrower for banks. 
  • Loan repayment – under this rule, the lender tries to determine if the borrower can repay a loan by looking at factors such as current monthly income or assets, employment status, job stability, existing debt obligations, or credit history. When evaluating these factors, A-lenders will usually also use third-party records to verify the information.

Improving Your Chances Of Getting A Home Equity Loan With Poor Credit

home equity loan poor credit report

As you can see by now, working with high street lenders when applying for a home equity loan can turn into a complete hassle when you have bad credit. Unless you are a perfect-on-paper type of borrower, all the criteria that banks request can scare away most prospective applicants.

The good news is that credit scores aren’t static. Suppose your credit utilization rate is less than ideal, or its score is below average due to poor financial decisions. In that case, the good thing is that you can rectify this situation and improve your credit score.

The bad news, though, is that this process can take months or even years of diligence and responsible financial planning, so it doesn’t apply to homeowners who need a fast loan solution.

The Easy Way To Get A Home Equity Loan With Bad Credit

There’s no doubt that if you have bad credit and plan to work with banks, getting a home equity loan can be done. Your application can take a long time to be approved, or you could be offered a higher interest rate than you would expect.

So, if you’re dealing with a bad or bruised credit, divorce, bankruptcy, or if you’re simply tired of the huge down payments and the high-interest rates that banks offer, working with the best alternative mortgage broker in BC, Canada, will solve all your bank issues. 

    Get a FREE Assessment

    Our experienced financial advisors can help borrowers with even the most complicated credit situations, so you won’t have to settle for any offer you might get.

    Needing only your home as collateral, our selected lenders won’t look at factors such as your payment history, credit limit, existing debt load, or how long you’ve had your credit accounts. More than that, they have lower interest rate offers for high equity loan-to-value homeowners in major centres. Especially when you’re dealing with bad credit, a good idea is to talk to as many lenders as possible and compare home equity loan offers. But not all homeowners are up for that. The process can take a lot of time and also requires at least a bit of financial knowledge.

    When working with us, we’ll take care of all that!

    We’ll shop around on your behalf, explore all the options and only present you with the best home loans in BC, Canada. As we already have a great selection of the best private lenders in Canada, we know who to turn to for solving your application in the fastest time possible.

    So wait no more and let us help you! All you need to do to get started is to enter in a few details. Once you finish, one of our advisors will be with you shortly to confirm your appointment. Our application process for a home equity loan is quick and painless and could save you big in the future both in terms of time and money, even if you have bad credit.

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