Bad Credit Home Equity Line Facts
Learn everything you need to know about home equity lines of credit here. We’ll tell you how they work, how they differ from conventional equity loans, and what their benefits are.
HELOC: What You Need to Know
A HELOC (home equity line of credit) is a home equity loan that works more like a credit card. Your lender will approve you for a certain sum of money up front that will represent your limit, or the total amount you can borrow. You will then access your bad credit home equity line as you need it, borrowing sums of money periodically to cover your expenses. During your HELOC’s draw period, which is usually 5-25 years, you can borrow funds and will pay back only what you borrow plus interest. Depending on how often you access your bad credit home equity line, you will have a minimum monthly payment requirements that is often “interest only” with many lenders. When the draw period is over, you will have to pay the full amount that you have borrowed in a lump-sum balloon payment if you have not paid down the principal over time. If you have any questions, please check out our Frequently Asked Questions page.
Home Equity Loan vs. HELOC
You might be wondering how a bad credit home equity line differs from a traditional home equity loan. Here are the most important similarities and differences:
- A HELOC does not advance you the entire loan up front
- Most HELOC loans have variable interest rates as opposed to fixed interest rates
- With a HELOC loan, you can make interest only payments (varies by lender)
- Both loans use your home as collateral
- With both loans, the interest is tax-deductible
Benefits of a Bad Credit Home Equity Line
A bad credit home equity line has many benefits to offer:
- Borrow only what you need, when you need it
- Minimize monthly payment expenses with interest-only option
- Use a bad credit home equity line to finance ongoing home improvement projects
- Get the funds you need to help with living expenses
- Get a loan with a reasonable interest rate even with bad credit
- Reduce your tax burden by deducting the interest of your loan
