It’s almost spring and it’s the perfect time to start shopping around for a loan even if you have bad credit. For most people their home is the best place to look for spare money – even if they have bad credit. During the spring most families look to do remodeling, yard work, or a variety of other things that require substantial money to complete. If you have bad credit, you really just need to look around a little bit longer. There are plenty of loan programs out there for people of all credit types and you’ll be pleasantly surprised how many lenders there are for people with less than perfect credit scores.

First you need to figure out how much equity you have in your house. Typically you can base your home’s equity on the sales price or an appraisal price if you have one completed. You’ll need to check the papers you received when you purchased your home for these prices. Now you need to check one of the the most recent loan statements. Simply subtract the current loan balance from the total value of your home and you’ll get approximately how much equity you have.

Next you need to create a budget so that you can figure out what you can afford. Get your total net income, calculate your total monthly expenses, and subtract the expenses from the net income. Most people keep the expenses in a checkbook, Quicken, or simply online in a bank statement. It’s best to use the average monthly expenses for a year instead of just one month since they change. You can get this by adding your total expenses for the past year and then divide that number by 12. Now you can figure out how much of your income is available outside of your regular expenses by subtracting the average monthly expenses from your monthly income.

Now you need to determine how much you can really afford to borrow from the bank. Most people find that the easiest way to do this is with a home equity amortization calculator. Another way is to use a physical book that has amortization values in it. See what the potential home equity loan amount is, interest rate, and the term you want in months. Mpst equity loan rates run between 6 and 17%, and are usually higher for people with bad credit (I’m assuming you already understood the rates would be higher). Most lenders will typically only finance up to 80% of your home’s equity, but some will go as high as 90%. Look at what the monthly payments would be for the loan you want and see if your budget would allow you to make the monthly payments. Whatever you do – don’t get an equity loan without having the monthly income to support it.

Do you feel like your money is locked in a vault and you can’t get inside it?  Well having all of your available money tied up in your home’s mortgage is just like that.  The challenge is when you have bad credit on top of that and need to get an equity loan with bad credit.

So is it impossible to get money out of the vault that is your house?  Not at all.  The best thing to do first is get your credit report so that you know just how bad your credit is.  Once you have your credit score you can take the next steps.  The next steps are to talk with your current lender to see whether they can help you.  If not, you’ll need to seek outside help and that can involve many lenders.  The easiest way to seek help from multiple lenders is to use a lending website that caters to helping people with bad credit get a mortgage or in this case an equity loan.

Typically the amount you can borrow for a bad credit home equity loan is calculated by deducting the amount you still owe on your existing mortgage from the current value of your property.

Most mainstream mortgage lenders don’t offer bad credit home equity loans due to the risks associated with them. Lenders that offer bad credit home equity loans typically offset the high risk by charging a higher interest rate than those rates offered others with a good credit rating.

Whoa – higher interest rates??  Don’t let this scare you – the higher interest rate applied to a bad credit home equity loan still makes this a better way of getting cash than other methods.

The best way to look at it is – even if the interest rate for a bad credit home equity loan is 9 to 18 percent, it’s still better than paying ridiculous rates of 19-35% for credit cards. The other benefit is that accrued interest on a bad credit home equity loan is typically be tax deductible unlike credit card interest that’s not.

It’s a dangerous world out there…being prepared is a necessity – especially in these economic times

Many people that have bad credit assume that the solution to their problems is to get a debt consolidation loan using the equity in their house. Now don’t get me wrong – it can solve problems, but can create brand new problems. What problems? Well too many people pay off their other debts (credit cards, etc..,) and then start using the “new credit” all over.

So how do you use a debt consolidation loan properly? The best way is to pay off all of the credit cards, but if you can’t pay off all of them, just pay off the highest interest cards first. Now is the hard part that most people don’t do – cancel all but one card with the best interest rate.

Now you’ve consolidated your credit cards using your debt consolidation loan…

Almost always – when interest rates fall, most home owners tend to rush to refinance their mortgage. Most of the time they do so without pausing to consider whether refinancing is a good idea or if it makes fiscal sense. Unfortunately these home owners can easily be lured by the promise of lower mortgage interest rates, but the rates are only a small portion of the bigger picture.

Serial refinancing means to take out new mortgage loans every time rates drop a quarter point. There are far too many people that refinance multiple times in a short period. These people should be smarter than that because every time they refinance they add more principal to the end of the loan and extend the term of the loan.

Best advice – wait until it REALLY makes sense to refinance or when you absolutely must refinance to get extra cash in hand.

It seems that everyone is looking for money these days and not just people with bad credit.  If you do happen to have bad credit, you’ll need to do a little extra work, but the money is available.

Right now Obama has many plans in effect to help consumers with obtaining money based on their home’s value.  Regardless of your credit situation, the best way to find out what programs are available is by picking up the phone and calling your current mortgage company.  Just explain your situation and what you’re looking for and if there’s a plan that they support, then they’ll ask you a few questions and send you some paperwork to fill out – that’s it!

Get the new year off to a great start and get your loan process started NOW….