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Benefits of a Mortgage Home Equity Loan After Bankruptcy
Author David Schneider | Jan 07,2008
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Struggling to get back on your feet after bankruptcy can be a painstaking process. Most likely, you're looking for a way to return to financial stability and improve your credit score as quickly as possible. One option that some individuals take advantage of to help rebuild their credit is a mortgage home equity loan.What is a Mortgage Home Equity Loan?A home equity loan uses the accumulated equity in your home as collateral. Upon approval, you will be granted a loan up to the total amount of equity you have earned on your home. As with all loans, you will be required to make monthly payments that include an interest rate. If you fail to pay your home equity loan, the lender will seize your property and sell it in order to recoup their losses.Consolidate Your Debts with a Mortgage Home Equity LoanA mortgage home equity loan can be used in any manner you see fit. Some people use them to pay hospital bills or school tuition. In your case, you will want to use it to pay off any current debts that remain after your bankruptcy. This will help to make cleaning up your credit score easier because you will only have to make one monthly payment to your home equity lender, as opposed to several payments to several different lenders.A Mortgage Home Equity Loan May Carry a Lower Interest RateA mortgage home equity loan may wind up saving you thousands of dollars in interest. More than likely, the amount of interest on your loan will be dramatically less than the debts you currently have. Credit card debt is especially notorious for charging high interest rates. If you can eliminate these exorbitant charges, then you stand a much better chance of cleaning up your past credit mistakes in a quick and efficient manner.Home Equity Loans May be Easier to AcquireIn the eyes of a lender, bankrupt individuals are not the ideal candidates for loan approval. This makes sense, of course, but it can be hard to improve your credit score if you don't have any credit to work with. Fortunately, because home equity loans have a safety net (your home's equity) that minimizes potential losses for the lender, they may be more willing to approve you. Don't get your hopes up just yet, however. More often than not, a certain amount of time needs to have passed since you filed for bankruptcy before a lender will be comfortable with granting you a home equity loan. This helps to make sure that you've had enough time to get your financial affairs under control. Typically, this time frame is two to four years from the time of your bankruptcy. |
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