Home Equity Loan With a Bad Credit
The intention of this essay is to make the reader aware about the features of bad equity loan and the unfavorable conditions to be satisfied by the customer with respect to the loan agreement. This also warns the borrower against the dangerous circumstances prevailing with respect to the agreement. Anyway the customer should reconsider before signing the agreement for purchasing a bad equity home loan.
Home equity bad loan is really not ideal
The home equity loan is the amount of cash available in terms of equity of homes. Equity is the difference between the actual value of homes and the loan collected in terms of home by mortgage. For example let the market value of a house be Rs.1,00,000. The mortgage loan amount on behalf of the owner of the house can be assumed as Rs.50, 000. Then the equity of the house can be calculated as Rs.50, 000. The market value of the house is considered with respect to place where the house is located. In an equity loan the home is used as the pledge of borrower to the lender. This process is to make the borrower too serious in the case of loan repayment.
The home equity bad loan is really meant for those who haven't very good credit history. In previous loan matters they might have become defaulter due to some inconveniences. Sometimes he will be a bankrupt or there may be late payments in the history of loan repayments. To provide loan facility to such persons they are forced to satisfy some bad credit programs by the loan lenders. In bad equity loans the customer is asked to pay high interest rate than the normal one. In certain times the lenders may extend the duration of bad loan payment as a favor to the customer. This is actually a high risk factor with respect to bank authorities. The process of charging high interest rate in terms of bad equity loans are in view to make up the losses to be created by the customers. Their aim is to collect extremely good amount from the loan borrowers within a short span of time.
On examining the rules and regulations of a bad equity loan one can understand that there are no favorable factors to support the borrowers. In order to cope up with the high interest rates of the bad equity loans the customer can suggest to lower the repayment amount considerably. There are also interest only home equity loans to attract the customers. In this scheme the borrowers entitled to pay either the interest or the interest with installment of the principal loan amount. If the borrower is paying only interest then the loan amount will remain there unaltered. Hence, at last he will struggle too much to repay the loan amount altogether. In order to avoid such a serious situation the borrower should be very careful from the beginning itself. In this scheme the very high interest rates and long duration will enable the lender to collect an amount equal to principal through the category of interest. Then the repayment of the loan amount is really a good profit to them. But in most cases the customer often becomes a defaulter if anything miraculous has not happened.
Although the bad equity home loans can satisfy the immediate need of the borrower, the same is not ideal with respect to its terms and conditions. Hence, the customer must reconsider himself before deciding to secure a bad equity home loan from any financial organizations.
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