Asking for a home equity loan with zero credit history? This seems to be a tough job for the financial institutes to lend money to borrowers with no credit history.
A credit score is the first thing a lender examines to know your financial ability to repay the loan or not. A good credit score would reap financial benefits. However, a bad or zero credit history will bring challenges for loan approval.
A home equity loan is an easy way to repay debt or mortgages. It also helps you build house repair costs and other emergency funds. However, asking for a loan with no credit history will elevate you to face a challenging task. Let’s see some options to ask for home equity with such critical credits:
Ways To Get A Home Equity Loan
Following are some ways you can get a home equity loan with bad or no credit history:
Collateral Loans
Loans are two types – Unsecured and secured loans. The secured loans require a security object which acts as collateral.
The significant problem with no credit history is that you will face high-interest rates. Also, your house will be at risk as if you cannot repay the loan, the lenders or banks will take away the house.
However, if you apply for secured loans with collateral, the lender will approve the home equity loan at a lower interest rate than the market. It is because of the collateral of your house, which acts as a security for the loan. This will reduce the risk and act as a guarantee for the lender.
The major downside is that your house will be at risk if you cannot repay the loan. However, it’s also a boon for people with zero credit scores.
By Recruiting a Cosigner
Most banks and financial lenders hesitate to lend you money when you have a zero credit score or no credit history. Since you lack a guarantee to pay back, you lose credit worthiness to ask for home equity loans.
However, banks will lend money to someone with a good credit history. Banks will easily lend you the loan if you recruit a cosigner who can act as a guarantor to repay the loan. The cosigner will have to repay the loan with interest if you fail to repay or are found as a defaulter.
It’s essential that the cosigner knows the risk and understands the cosigner’s responsibility. The cosigner can be a family member, relative or close friend who has a good credit history or jib security to maximize your chances of approval of the loan.
Personal Loans For Bad Or No Credit History
Another option for home equity is through a personal loan. This is helpful for applicants with no credit history. Obtaining a personal loan for home equity financing, you can borrow a lump sum of money and repay through monthly installments over the loan life.
Can You Get Personal Loans With Bad Or No Credit History?
Generally, top and prestigious financial institutes will not lend massive amounts due to a lack of guarantee of repayment. However, local banks and banks where you have your account can lend you the money. The issue is that they may charge high-interest rates due to the risk associated. Many community banks and credit unions are willing to support home equity loans.
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