Homeowners Loans With Bad Credit: What Factors to Look Out For

Using a large loan to wipe out existing debts in one go is a common practice, but actually securing a loan large enough to make a difference can be a problem. This is especially the case when the applicant has a poor credit history. But lenders are willing to grant homeowners loans with bad credit.Owning your own home opens a lot of doors when it comes to applying for loans from banks and other financial institutions. The simple reason is that every homeowner has a certain amount of equity on their home, which is perfect security to lenders considering large loan approval to homeowners.And because it is home equity, the size of the security is very high - perhaps even $100,000. That means that homeowners loans can be large enough to be used to clear all existing debts. But what are the factors that have to be considered before agreeing to such a loan deal?Secured and Unsecured LoansWell, the first is to decide whether to seek a secured or unsecured loan in the first place. Remember, if equity is used as security, then that share of the home is lost should the loan be defaulted upon. Lenders who approve homeowners loans with bad credit are usually quite strict about repayments.The advantages of a secured loan, of course, is that the interest rate charged is lower. This makes the loan more affordable, and therefore the chances of defaulting are lower. But large loan approval to homeowners is still a risk for the lender, so there are usually strict penalties to pay, like late fees for example.It may be worth considering an unsecured homeowners loan. The interest is higher and the repayments are more, but the borrower loses nothing if he should default. As long as the monthly repayments are affordable, then approval is likely and the funds needed are secured.Large Loans for HomeownersHowever, secured homeowners loans with bad credit are far more common that unsecured ones - especially when the sum needed is large. No lender is going to grant sums of $50,000 and more without some kind of security.This is where equity is so useful. It can be sufficient to secure large loan approval to homeowners who are already in severe financial problems. What this effectively means is that all debts can be cleared in one go - even as much as $100,000.However, be sure to calculate that there are benefits to be had. The repayments on the homeowners loan have to be lower than the combined repayments on the existing debts in order for there to be any advantage.Terms and ConditionsSo what are the terms and conditions to watch out for? The first concern is the interest rate. This will be very low if home equity is provided as security, but when it comes to secured homeowners loans with bad credit, the best rates will be gotten from online lenders.Making the repayments as low as possible is essential to ensure affordability. That is why a longer repayment term is advisable - perhaps 20 years, depending on the actual sum being borrowed. It may be what is needed to get lenders to agree to a large loan approval to homeowners when the loan is unsecured.Finally, be aware that credit history plays a big part in the approval process for unsecured homeowner loans. So, any previous county court judgements, bankruptcy rulings or other financial issues, will be taken into account. So, be ready to make compromises.