Things may be a bit challenging for some of our fellow Canadians even with things looking like we will be soon able to go back to normal. After all, financial responsibilities do not end and cannot be told to wait for better days. What can you do if you happen to have bad credit but is interested to get a line of credit in Ontario? Is this possible? What are the important things to know and be ready for?
How to be Approved for A Line of Credit with A Bad Credit?
"Trying to get a line of credit from traditional lenders when you have a credit score below 740 is a huge challenge because most options for lines of credit are unsecured loans. It will be difficult to get a lender to let someone with bad repayment history borrow some money." said AJ Smith of Homebase Mortgages located in Toronto. However, things can change if you want to get a secured line of credit. If you are willing to use something valuable as collateral for your line of credit, then bad credit isn’t much of a hindrance because the main factor that the lender will consider for approving your loan is the type of collateral that you can provide. This is where getting a Home Equity Line of Credit comes into play. It is a secured loan that is guaranteed by the equity you have in your home if you are a homeowner. Other options require you to improve your credit score first or get a co-signer which will take more time and money that you may not have at the moment.
Use A Home Equity Line of Credit
With a HELOC or Home Equity Line of Credit, you can get access to cash even with bad credit. What’s more, is that you can use the money from the line of credit to fix your credit score by utilizing it to help pay some debts or consolidate debt if you are so inclined.
Lenders typically only look at the amount of equity for a HELOC. Your credit score as well as employment status are not very important considerations to get approved. If you do not have an idea how much your home equity is, you can have a rough estimate by subtracting all other debts and obligations on the home from the estimated current market value. Please note that a professional appraisal is often needed when applying for a HELOC so it is best to factor in that additional cost as well as other fees if you’re approved.
HELOCs are the most flexible amongst all the home equity loans. Repayment is manageable as well as the interest rate. It lets you access the asset that you built in your home without having to sell your property. The downside is that you may lose your home if you fail to pay which is why it is important to negotiate payment terms before signing up for a HELOC. Different lenders have different loan terms and you will want a lender that can work with you so that you can achieve your financial goals.
Ready to apply for a line of credit using your home equity? Contact us now to send an application so you can get approved in as early as 24 hours!