I have poor credit; is it possible for me to use my house (which is paid off) to help me get approved for a loan?
I have poor credit. Is it possible for me to use my house (which is paid off) to help me get approved for a loan?
Dear "I have poor credit, is it possible for me to use my house (which is paid off) to help me get approved for a loan"?
First put on the emergency brakes!! Stop, Stop, Stop........Please Stop!!!!!
I am thankful you decided to write in to ask this question.
I am thankful to meet you in this forum and I am honored to guide you along the way.
Today, something inside you propelled you to seek financial advice. This advice seeking venture was the very best financial decision. This decision will affect you, your family, your long term financial success.
Detail how you gained ownership of this home? Acknowledge home ownership is one the best financial asset you will have. Do not ever risk this ownership position that is yours. This asset despite your otherwise bad credit will increase in value month after month and year after year in a valuable market if you care for this property as you would an infant or a child.
Very few individuals own their homes outright. For this you are blessed. Acknowledge this blessing.
Understand completely the consequences of taking out a loan. With bad credit, caused by you and your alone, understand interest rates are higher despite ownership interest of your home. Understand if you are an emmense credit risk creditors may attempt to "attach" your home. Understand all of this prior to having to have the latest and greatest whatever you are looking at for the moment. Understand years of debt on a loan are just that. Though you may want the item now, you must deal with high interest rates and the costs of owning the loan to pay down debt for a very long time.
Start today by understanding your mental mindset about money, understand why it is you have bad credit, why is it you are looking to get a loan and risk your "paid off property" to increase debt to an already compromised situation. Read about groups "FI Group" Financial Independence, "Debt Snowball" by Dave Ramsey, most of all start a diary about your spending habits and start to check in with me no judgment.
Vow today to correct a negative debt situation. Vow to improve your credit score.
Do get in control of your finances. Think twice about getting a loan !!!!
All my very best to you,
Jan Attard, RIA, MBA, CMT
J. Oliver Maxwell, LLC
The short answer to your question is, "Yes, that's possible." That said, even with the collateral, most lenders are concerned with your ability to make the payments. If you don't, they will eventually take your house, although they really do not want your house.
But I think there are more important questions to answer. Why do you need a loan? Is it for education to improve your earning capacity? Then, it would be better to seek out a student loan. I would suggest that if it is for most any other purpose, then you need to examine why you cannot meet expenses with your current cash flow, which should be pretty good if you have no house payment. Take a serious look at your spending habits and maybe make some changes to get spending in line with your current income so there is no need for a loan.
I don't want to seem insensitive here. If you still absolutely need a loan, perhaps for medical expenses for a sick child, before putting your house at risk, consider a vehicle title loan, join a credit union and borrow from them, take a 401(k) loan, borrow from family or a friend who is able to help, or ask for installment terms from the provider of whatever it is you need.
The other question is: Why is your credit poor? If it is because your debt to income ratio is too high, then the last thing you need is more debt. If it is because you have a lot of late payments, then the best thing you can do for yourself is to simply pay your bills on time. If you have past collections against you, then the best thing you can do is focus on how to do better going forward. More debt is not a good solution to poor credit or to shortfalls in cash flow. The solution is to either spend less, or earn more, or both.
I appreciate your question and this is a great opportunity to turn things around. And you have also helped others who read this to learn. I wish you the best.
Hard to answer without more details. But generally, yes. You would be using your home as collateral for a recourse loan - meaning you're pledging your house as collateral, and giving the lender the option of foreclosing against you should you stop making payments. Are you sure this is what you want? If you need some quick money, look at a 401K loan. No credit check.
Why are you looking to go into debt? Generally speaking, for most individuals, going into debt is not condusive to building wealth. If you have your home paid off you should have great monthly cash-flow available to save up quickly for purchases or investments. Best of luck!
My advice is don't do it if there is any other way. Some stock brokers might say yea! Go ahead borrow all you can and lets invest it. That might work if you lucky and your
timming is better than most pros.
Keep that paid off free and clear deed in the safe deposit box.
I think if you want to improve your credit score you'll find your creditors will ultimately work with you no matter how threatning they sound. It's a more conservative approach
and over time your credit score will improve.