With a home equity line of credit, you can borrow against the value of your home without having to pay closing costs. Those with bad credit can get low rates on loans if they are backed by their equity. If you use your credit wisely, you can use a line of credit to get your credit score back up to where it should be. But you need to choose the right lender to make sure you get a good deal on your rates and fees.
What to look for in a line of credit against your home's value
If you have bad credit, you need to be extra careful about the terms of a line of credit. Most lenders won't charge you any fees when you close on a loan. So you save on the costs of getting a second mortgage at the start.
Your rates can be set or change over time. Most lenders start loans with variable rates lower than loans with fixed rates. You can also borrow money when you need to from a line of credit. So you only pay interest on what you use.
A line of credit also comes with fees. You might have to pay fees for paying early, keeping a minimum balance, or other things. Before you sign a contract, you should know how fees will affect your plans for credit. For example, if you want to pay off your line of credit in a year, ask for an early payment fee to be removed.
Different Lenders Mean Different Terms
Different loan terms are written by different lenders. Rates will be different, as will fees, payment schedules, and the possibility of refinancing in the future.
Even though low rates are important, you should also look at the lender's terms. You can also save money by choosing a loan with low fees for paying off the balance and refinancing.
How to Compare Loan Companies
To compare lenders, the first thing you need to do is get credit quotes. Work with sub-prime lenders if you have bad credit.
Most companies use a website where you can enter your information to get an instant quote. Besides the rates, you should also look at the terms.
Most financial offers will tell you about fees, how payments work, and the costs of refinancing. If they don't list the most important terms, you should ask for more information before agreeing to an offer.
