Home Improvement Loans with Bad Credit?
There are several home improvement loans available. If you have bad credit, you are not necessarily barred, but do know it will be more difficult.
You should first check your credit report and your credit score. Realize that your first priority may be to do what you can to improve the score. Due to the state of the economy, lending institutions have more restrictive lending requirements these days.
A Home Equity Line of Credit (HELOC) is the most popular type of home improvement loan and they are fairly standard, with a few exceptions. A HELOC is really a second mortgage lien against your property and requires that you have a certain amount of free equity in order to qualify. Combined first and second loan to value (CLTV) ratios are usually limited to under 70% for qualifying purposes.
A HELOC is usually an ARM (adjustable rate mortgage) with rates tied to an index, usually the Prime Rate plus a margin. For example if the today’s Prime Rate is 8% and the margin is 1, then your rate will be 9%, adjustable monthly based on what the Prime Rate is doing. These home improvement loans are usually interest only for ten years at which time the principal is due (balloon payment).
Banks will require that you have not only good credit but a steady, long-term employment or proof of income in order to qualify for the home improvement loan or HELOC. You will usually be required to provide two recent pay stubs and 12 months of bank statements (all pages).
If you find you are not able to meet these requirements you can make your first project to improve your credit score. Click here for ideas and suggestions to improve your credit score. It cannot be done overnight, but it is not impossible. Click here for other options to seek a loan despite your credit history. More suggestions and possibilities are explored in the video below.
Home Improvement Loans with Bad Credit?