Jumat, 08 April 2011

Bad Credit Home Equity Line of Credit - Choosing the Right Lender

A home equity line of credit allows you to draw on your home's equity
without having to pay for closing rates. For those with bad credit,
credit secured by your equity can provide you with low rates. Using your
credit wisely, you can use a line of credit to reestablish a good credit
rating. However, you need to choose the right lender to be sure you are
getting a good deal on your rates and fees.
What To Look For In A Home Equity Line Of Credit
With poor credit, you need to be especially careful of the terms you
agree to with a line of credit. With most lenders, you will not have to
pay any closing fees. So you save on upfront costs of a second mortgage.
Your rates can be fixed or adjustable. With most lenders, adjustable
rates start out lower than fixed rate loans. Lines of credit also allow
you to borrow funds as needed. So you only pay interest on the amount
you use.
Fees are also part of a line of credit. You may possibly have early
payment, minimum balance, or other fees. Before signing a contract,
understand how fees will affect your credit plans. For example, if you want
to pay off your line of credit in a year, then ask for an early payment
fee to be removed.
Different Lenders Mean Different Terms
Different lenders write their loan terms differently. Variations in
rates should be expected, but so should differences in fees, payment
schedules, and future refinancing possibilities.
While low rates are important, also take a look at terms when
considering lenders. Savings can also be found by picking financing with low
fees for balances and refinancing.
How To Compare Lenders
To compare lenders, you need to start by requesting credit quotes. With
adverse credit scores, work with sub-prime lenders.
Most companies use a website where you can enter your information to
get an instant quote. Besides looking at rates, also note the terms.
Most financial offers will disclose fees, payment structure, and
refinancing costs. If they don't list basic terms, then request additional
information before committing to an offer.

Unthaw Frozen Home Equity Lines of Credit

You may have taken out a home equity line of credit to help you cover the expenses of life - anything from adding an additional bedroom to your home to putting your twins through four years of grad school. But if you suddenly received a letter stating that your home equity line of credit has been frozen, you are probably wondering where to turn next.
Most home equity credit lines bear the stipulation that the creditor can freeze your line under situations that are outlined in Regulation Z, under the Federal Reserve Board's codes. For many home equity lenders, this is interpreted as being able to shut you off from your available line of home equity credit if market conditions in your area make the value of your home decline, or if your income has been reduced to where they feel you are at great risk of defaulting on payment to them for credit already extended.
Get Around Regulation Z
You have several options. You can argue with your lender to attempt to persuade them to reinstate your credit line. You can back up your argument by pointing out your good payment history (if payments have come due under your agreement); or by listing homes in the area that have recently sold at or above market value. Discussing the freeze with customer service for your lender has a small, but not impossible, chance of getting your credit line unfrozen.
Your best option is to vote with your feet by choosing a different lender. True, you may have to pay additional closing costs over what you have already paid for your current, now-useless credit line, but you can switch lenders.
In fact, there are online lenders who deal very effectively with taking on borrowers who have had a frozen credit line. With less strict stipulations regarding market values, these lenders can refinance your current line while making the additional credit you need available to you.
Apply Online For the Credit Line You Need
To apply, you will need to gather all the information pertinent to your current home equity line of credit. Visit the lender's secure online site where you can begin the application process. You will be asked to verify certain things - like your income, employment, etc. Most of the needed documentation can be either emailed or faxed to the new lender.
As with a your original home equity line of credit, your new credit line will allow you to use your home equity line of credit for up to twenty five years. At the end of that period, you will have the opportunity to renew your credit line, or begin repayment. Oftentimes, you can pay during the time that your home equity line of credit is open; this greatly reduces the amount that you will owe at the end of the term.
If you have had your home equity credit line frozen, voting with your feet by choosing a new lender can not only make a bold statement to the lender that you have other options, but can also save you money by the possibility of getting better rates online.

Home Equity Lines of Credit and Personal FICO Credit Score

Today we're going to discuss how a HELOC (Home Equity Line of Credit) can negatively impact your credit. Odds are that some of you out there have tapped into the equity in your home to finance your business endeavors. Quick and easy right? Yes, but it may have devastating effects on your personal credit. You've done everything you're supposed to, paid on time, and have no clue why your score went south. Here's why:
Thirty percent of your personal credit score is made up of how much of your credit has been utilized. Of particular importance to a lender is the percentage of revolving credit you have used. When that number exceeds 30%, your scores can suffer. When that number exceeds 50% your scores can plummet, sometimes by as much as 50 points for a single occurrence.
Over 60% of the banks that offer HELOC'S report them on your credit bureau report as "revolving" credit. That's right, HELOC balances are reported just like credit card balances. If you take out a Home Equity Line of Credit and max it out, be prepared for the consequences!
If this is your only business financing option what do you do? There are a couple things. Obviously, the easiest thing to do is to keep your balance below 30% of available credit. You might also want to ask your lender as you interview them, how they report to the bureaus. Do they report HELOC's as a revolving debt or as real estate related? Don't be afraid to visit several lenders until you find the product you want. The third option would be to take out an actual second mortgage. Second mortgages are always reported as real estate related.

Home Equity Lines Of Credit: Pros And Cons

A home equity line of credit is similar to a second mortgage. The difference between a home equity loan and a home equity line of credit or HELOC is mainly the way the loan is given. Homeowners cash in on their home and finance their dreams with the help of a HELOC at low interests rates.
HELOC has its pros and cons. Most of these loans have very little or no closing costs. This results in lower monthly payments compared to fixed interest rate loans. The variable mortgage interest rates are usually much lower than the standard fixed interest rates loans. Customers pay the interest only on the money used and not on the entire loan amount. The remaining unused balance of the equity line can be used as an emergency fund. These are some of the pros of HELOC a borrower can enjoy.
On the flip side, HELOC have a lot of disadvantages. The interest rates are not fixed and they may fluctuate. Most lenders charge borrowers a yearly fee for their services. Many lenders exploit the borrower, especially senior citizens, minorities and people with bad credit. They are more susceptible to the lender?s abusive and exploitative strategies. Customers need to do a lot of research before selecting a particular lender.
It is also essential for customers to submit all valid documents to the lender for verification and authentication. They should check whether they have enough income proof to make the repayments in time. All the terms and conditions have to be read carefully to identify the fine print of the loan agreement. Many borrowers end up signing agreements with many hidden clauses and charges.

Home equity loan vs. home equity line of credit

if you’re a homeowner, you can borrow against the value of your house through either a home equity line of credit (often called a HELOC or a line) or a home equity loan (often called a HEL or loan). Both are essentially a second mortgage.
What’s the difference?
A HELOC allows you to draw funds, up to a predetermined limit, whenever you need money. There is generally a minimum payment due each month, with the option to pay off as much of the line as you want. The way that you draw and repay funds for a HELOC is similar to the way you draw and repay funds for other revolving lines of credit, such as a credit card. With a HEL, you receive a lump sum of money and have a fixed monthly payment that you pay off over a predetermined time period. In each case, the amount you can borrow is based on factors such as your income, debts, the value of your home, how much you still owe on your mortgage and your credit history.
The appeal of both of these types of loans is their interest rates, which are almost always lower than those of credit cards or conventional bank loans because they are secured against your home. In addition, the interest you pay on a home equity line or loan is often tax deductible (consult a tax advisor about your particular situation).
Which is best for you?
Generally, a HELOC is a good choice to meet ongoing cash needs, such as college tuition payments or medical bills. A HEL is more suitable when you need money for a specific, one-time purpose, such as buying a car or a major renovation.
Comparing the costs
Both HELOCs and HELs usually carry a higher interest rate than that of a first mortgage. With a HEL, you may choose either an adjustable rate that fluctuates according to variations in the prime rate, or you may opt for a fixed rate. A fixed rate enables you to budget a set payment monthly without worrying about increasing costs should interest rates rise. With a HEL, there are also closing costs that you should consider.
A HELOC usually carries a lower initial interest rate than a HEL, but its rate fluctuates according to the prime rate, so there is more interest rate risk. Unlike a HEL, where your monthly payments are a set amount, a HELOC enables you to borrow funds as needed and repay as little as interest only each month. In addition, there are generally no closing costs when you open a HELOC.
Keep in mind, your home is the collateral for both a HELOC and a HEL. If a HELOC’s easy access to cash tempts you to run up more debt than you can repay, or if you fail to make your payments, you risk losing your house.