Taking out a home equity loan is one of the time-tested ways to get out of debt. There are two general kinds of home equity loan available to borrowers with bad credit history – depending on your specific financial situation; you can either take a 2nd mortgage, or a home equity line of credit (HELOC). You need to know how each works in order to decide which one to apply for.
A 2nd mortgage loan is one of the two types of home equity loans.The other type is a "home equity line of credit" or HELOC. The main difference between the two is the total loan amount and how the loan is paid.
This type of home equity loan allows you to borrow a fixed amount with a fixed interest rate, and is best for consolidating loans. Note, however, that interest rates for bad credit applicants are generally higher by a few percentage points. If your credit is bad but you still need money, you will unfortunately have to bite the bullet and take out a higher-interest loan.
How much is the interest rate? It depends on factors that you were also used to evaluate your first mortgage such as your credit history, the prevailing interest rates and the value of your home. Remember that the interest rate of a 2nd mortgage will be a little higher than the interest rate you are paying for a 30-year first mortgage. However, the interest in 2nd mortgages is tax-deductible. The terms run from five to 30 years.
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