Bad Credit Home Equity Loan: Everything You Need to Know

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If you’ve been paying attention to the real estate market at all recently, you’ve likely heard about the soaring property prices in Canada. If you’re in the market for your first home, this news might be pretty disappointing. However, if you’re already a homeowner, you’re likely aware the rise in property values in your area means an increase in your home equity.

For many Canadians, buying a home is the biggest financial transaction of their lives. What this means, though, is that a big chunk of your money is trapped in the equity of your home where you don’t have access to it.

That’s where home equity loans come in. However, if your credit has taken a bit of a beating, you might be worried that you won’t be able to qualify for a home equity loan.

What do you need to know about getting a home equity loan with bad credit? Is it possible? Let’s take a look at everything you need to know.

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What is a home equity loan?

The equity you have in your home is the difference between how much money you still owe on your mortgage and the value of your home. For example, if you owe $100,000 on your home and it’s worth $300,000, you have $200,000 in home equity.

There are two different ways that home equity can increase. This is through the increase in your property value and through paying down your mortgage.

A home equity loan is a type of consumer debt. You might also hear them referred to as a second mortgage, a home equity installment loan, or an equity loan. These loans make it possible for homeowners to borrow money from their home equity.

Home equity loans are usually fixed rate loans. They are a popular borrowing method because they typically have lower interest rates than other options like credit cards or personal loans.

It’s worth noting that a home equity loan isn’t synonymous with a home equity lines of credit (HELOC). These typically have variable rates and work more like a credit card rather than receiving a lump sum payment.

Real estate professionals offer their clients contracts to discuss home purchases, insurance or real estate loans. Home sales agents sit at the office with new home buyers in the office.

Types of home equity loans

While mortgage loans and installment loans can be confusing, home equity loans are simple. There are two types of home loans.

First, we will review fixed-term loans.  These loans are generally short-term and given to the borrower as one lump sum. The interest rate is usually fixed and monthly payments are based on the amount advanced. A home equity loan for bad credit is generally easy to qualify for because your home is used as a security.

Fixed-rate home equity loans are easier to qualify for because they don’t require income or credit. Transunion and Equifax credit reports aren’t given much credence, making it possible to get a home loan with bad credit.

The second type of home equity loan is a revolving loan. Most often referred to as a home equity line of credit  (HELOC), which is approved for a predetermined amount.

Instead of advancing all of the funds at once, you access them as you need them, like a credit card.  Payments are based on what you owe and credit can be reused once it’s paid off. It is important to note that HELOC’s are more complicated to qualify for and most lenders want to see good credit and proof of income.

While it is possible to get a home equity line of credit with bad credit, it is a little more challenging than a home equity loan.  Income and credit are often reviewed more thoroughly but they are still possible.  One of the best ways to improve your chances of qualifying is to work with a broker who specializes in these types of home loans.

types of home equity loans

Why take a home equity loan?

A homeowner may want to tap into their equity for many reasons. Home credit loans in Canada can be a great way to access cash fast.  A home equity loan can be used for:

  • Consolidating high-interest debt such as payday loans
  • Home renovations
  • Pay outstanding debt for property tax arrears
  • Stop power of sale
  • Rebuild your credit if you have a bad score
  • Eliminate Canada Revenue Agency debt
  • Adding liquidity to your bank account

Beyond this, the possibilities are yours to discover. Turnedaway.ca has made qualifying for a home loan easy.

How Does Borrowing against Home Equity in Canada Work?

When you take out a home equity loan, you are taking out a secured loan. Because the loan is backed by your property, the interest rates can be much lower than other loan types. In order to receive a home equity loan, you have to apply and be approved.

If you are approved for a home equity loan, you will receive the money in one lump sum.

how home equity loan approved - lender and borrower

What Is the Easiest Way to Get a Home Equity Loan?

Home equity has long been considered a predictable way to build wealth in the long term. However, this also means that your money is locked up in an incredibly illiquid asset: your home. If you are happy with where you live, you likely don’t want to sell your house and move just to get access to a little cash.

Luckily, there are a number of ways that you can gain access to your equity without selling your home. One of these is a home equity loan, but you also might consider a home equity line of credit (HELOC), a reverse mortgage, or refinancing your home.

You can apply for a home equity loan with a financial institution or home equity lender. However, traditional lenders have fairly strict requirements for approval. More flexible lenders such as Turned Away offer home equity loans without a credit check and without any income requirements.

I Have Equity But Bad Credit, Can I Still Get a Home Equity Loan?

Finally, if you have equity but bad credit, don’t worry. As a rule,  Turnedaway.ca’s lending partners approve loans based on the amount of equity in your home, not your credit score.

To begin with, we provide home equity loans for people in Canada with bad credit who have been turned away due to their credit or for not meeting income requirements.

If you’ve been turned away by one of the major banks for any reason, we offer a wide variety of solutions to fit almost every circumstance. Not every lender has adopted the same tight restrictions the major banks are following, we still offer home equity loans based on common sense lending practices.

man checking his credit score

Can I Get Home Equity Loan With Bad Credit?

If you’re hoping to get a HELOC loan with bad credit (or an instant home equity loan, for that matter,) you’re in luck. While it can be very difficult to obtain other types of loans with bad credit, a home equity loan is easier to get even if your credit isn’t ideal. This means you can stop googling “bad credit home equity loans guaranteed approval” and learn more about our options at Turnedaway.ca.

Why is this, you ask?

Basically, a home equity loan is a type of secured debt. This means that you are offering some form of collateral so the lender is left holding the bag if you default. In the case of a home equity loan, the collateral you are offering is your own home.

On top of that, home equity lenders typically focus on how much equity you have in your home when you apply for a home equity loan.

That being said, you might not be able to get a home equity loan from every lender. The five major banks in Canada have requirements you must meet to borrow money in this capacity. The criteria are:

  • Having a history of making on-time debt repayments
  • Having a minimum credit score of 620
  • Having a debt-to-income ratio that is 35% or lower
  • Having at least 15% equity in your home
  • Having stable employment

If you don’t meet these criteria, you will want to look to more flexible Canadian lenders rather than traditional banks.

At Turned Away, we don’t have any credit requirements for our home equity loans. We’re here to help you access your home’s equity, and we do everything we can to ensure that there aren’t any obstacles standing in your way.

How to Get a Home Equity Loan With Low Income

Home equity loans can be essential if you are going through a period of financial hardship or if you need to fund a project you’re working on. If you don’t currently have a source of income, though, you might be concerned that it will be difficult to get subprime home equity loans.

As stated above, traditional lenders typically require that you have stable employment in order to take out a home equity loan. However, if you work with a more flexible lender, you can certainly access the equity in your property when you need it most.

Since home equity lenders focus on how much equity you have in your home, your income doesn’t necessarily have to factor into the decision of whether or not they loan you money. Since this is a secured loan, the lender knows that they can take possession of your house if you fail to pay back the loan. This means that they are more willing to take the risk of lending you money.

Turned Away wants to help people access their home equity when they need it most. Without any income requirements for home equity loans in Canada, we make it easy to tap into the savings account that is your property.

One reason that Canadians often take out a home equity loan is to consolidate their debt. If you are trying to consolidate your debt to lower your interest rate, simplify your payments, and be free of debt once and for all, check out this guide for homeowner debt consolidation.

low income home equity

How Can I Improve My Credit?

If you have existing bad credit and are interested in applying for a home equity loan in Canada, you’re likely relieved to know that you can get a loan without any credit or income requirements.

That being said, you might choose to improve your credit for the many other benefits having a good credit score can provide.

There are a number of tactics that you can use to build your credit over time. These include:

  • Using your credit wisely
  • Diversifying your types of credit
  • Monitoring your payment history
  • Building credit history over time
  • Limiting how many times you apply for credit

If you are considering taking out a second mortgage, you’ll be glad to know that this can also help your credit. You can learn more about why that is in this article.

Why Choose Turnedaway.ca?

Because our name says it all! We’ve been helping people obtain home equity loans for over 30 years. If you’ve been turned away by the bank for a loan in Canada, we can help find the financing you need. Improve your credit score while getting the support your need.

In this day and age, having bad credit or facing financial challenges are almost common place. Our team at Turnedaway.ca understands this and we are here to help.

Are You Searching for Easy Qualify Home Equity Loans?

Fast home equity loans can be an essential financial tool for homeowners. However, getting a loan based on home equity from a traditional lender can be tough if you don’t have income or if you have bad credit. Luckily, there are other options for easy home loans in Canada.

If you’re worried about getting a home equity loan with bad credit, you can rest easy. At Turned Away, the partners we work with are lenders that focus on the equity you have in your home rather than your credit score or your income. In fact, we exist specifically to serve people who might be turned away from traditional lenders.

Are you ready to tap into your home equity? Do you not qualify for a home equity loan from a traditional lender? If so, you can contact us and apply here!

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