One of the easiest bad credit loan is probably one for home repairs or improvements. That doesn’t mean it is a guarantee because there are still factors the lender will consider, but the chances of approval are greatly increased if you own real estate. You have to be careful, though, when you enter into a bad credit loan that is secured by your home because you can lose your home if you default on the payments.
Value of Collateral Has a Major Impact
When you’re looking for a bad credit loan for home repairs or home improvements, your chances for approval are increase because it involves a step that will increase the value of your home. On the other hand, it will also depend on the value of that collateral. If you recently bought your home and don’t have very much equity, you are not going to qualify for the best bad credit loan interest rate or repayment term unless you have been able to rebuild some credit over the past one or two years. If the value of the collateral is equal to or exceeds the value of the loan, you will receive a better interest rate than you would otherwise.
Employment Is of Less Importance than Collateral Value
When you are using real estate as collateral for a bad credit loan, your employment is of lesser importance than the value of the collateral. In some ways that can be a bad thing because it leaves those with a meagre income in a vulnerable position once they have used the equity in their homes to finance home repairs and improvements.
On the other hand, they are also increasing the value of their collateral by making sure their home is in top position. This leaves it up to the homeowner to make the decision regarding their ability to repay a loan that is secured by their home. Always know your own budget and the impact a new loan will cause but most importantly stay within your budget constraints even if it means having to wait longer to do the things you want to do.
Be Careful When Choosing a Lender
When you’re using your home as collateral for a bad credit loan, be careful of the lender you choose. Since many lenders do not conduct too much investigation when they are granting loans that use a home’s equity as collateral, you must look out for yourself. Even if the lender approves your request for the loan, if the repayment terms do not fit into your budget requirements, you need to find a lender who is willing to work with you.
Don’t make the mistake of letting a lender tell you how much you can afford in monthly payments, and even if they tell you that you “qualify,” only you know the payments that will make you feel comfortable. This is where many people get into trouble even with a primary mortgage—they think if the lender says they qualify for a £200,000 mortgage, they should obtain that size mortgage even if they would feel more comfortable with £150,000.