Here's how it works: your home equity is the value of your home minus any debts that you still owe on it. With home equity loans, you can receive a loan for anything up to the value of this equity, with your house placed as security. For this reason, these sort of loans can be riskier than an unsecured loan as if you are unable to abide by the contract of the home equity loan, then you risk having your house seized and auctioned off in order to recover the money. So while it's a perfectly valid and effective form of borrowing money, if you aren't certain that you'll be able to make the payments or have bad spending habits, this type of loan should be considered with caution and most likely avoided.
On the other hand, if you are certain that you'll be able to pay the monthly payments off each month as per the contract, then home equity loans are a great solution. Even though you have bad credit, the lender (usually a bank) will be a lot more willing to lend you the money without ridiculous interest rates because they have your home as security. The rates will be significantly lower than other sundry credit rates, such as credit cards, again because this is a secured loan.
Home equity loans for bad credit can be a great way of letting you get a hold of your financial situation. Often, people in bad credit have a hard time making payments on regular loans because the interest rates are so high, thus they end up missing payments and ruining their credit score further. With a home equity loan, it's possible to consolidate all your monthly payments into one manageable loan so that you're able to keep on top of the payments, gradually reduce your debt and improve your credit score over time. On top of that, you can actually release a large sum of money that can pay off a sizeable chunk of your high interest debts and drastically reduce the amount you owe.
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