Home equity line of credit involves getting additional credit from appraised value of your home. Once you get approval for home equity, you can borrow credit up to the credit limit. The lender usually takes 75% of the appraised value of your home and subtracts the balance you owe on existing mortgage. The balance becomes the line of credit or credit limit. Since home is considered as valuable assets for homeowners, many of them only use equity credit lines for major requirements such as emergencies, education, home improvements etc. Nobody plans for day-to-day expenses, as there is a big loss of losing a home hidden in it.
If your credit report shows that you have bad credits, home equity line of credit can be the best options for those homeowners. Determine how much equity you have in your home, it must be lower that than the value of your property. For example, if your home is worth $130,000 and you still have $90,000 left on your existing mortgage, your equity value would be $40,000, which you can use to pay off all your existing debts, and improves your credit score. Do not use it for vacations or luxury items otherwise after vacations your bad credits remains the same and you will lose your home too.
Refinance home equity line of credit if you have already used it in your old days. It can save you from rising interest rates and you can improve your bad credit. Most Of the time the interest rates of HELOC are tax-deductible and are much lower than those of credit cards and personal loans are. The percentage also depends on credit score and its Obvious that you have to pay higher for bad credit score. HELOC is all about creating values in your home and not incur additional debt. So, set your goals, make your budget, invest wisely and improve your credit score.