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The 5 Best Home Equity Lenders for People With Bad Credit

Do you have bad credit, but you would like to invest in another piece of property? Are you worried about getting a home equity loan? See what companies will allow you to shop for loans regardless of your credit score.
Do you have bad credit, but you would like to invest in another piece of property? Are you worried about getting a home equity loan? See what companies will allow you to shop for loans regardless of your credit score.

Are you worried about your future? Would you like to diversify your portfolio by buying a commercial office building so you can make income on the rent?

Maybe your best friend is giving you a great deal on his lake house because he’s moving out of state.

Perhaps the house next door is for sale and you would like the property to flip. Not only could you make a profit on the house, but your property’s value would improve because the neighboring home will look better.

You are full of ideas on how to make money, but the problem is that you are cash poor. You have built up equity in your home, but you are worried that taking out an equity loan will be impossible since your credit score is below 620.

Is there any hope in borrowing off the equity of your home so you can make a down payment on an investment property?

Although the rate may be high, some lenders will allow you to borrow money with less than perfect credit. Read on to discover who these lenders are and more about home equity loans. Finally, find a professional in the real estate industry who will guide you on your investment decisions.

What is a Home Equity Loan?

To qualify for a home equity loan, you need to owe less on the home than it is worth. But that’s not all.

You also need to have secure employment and a debt-to-income ratio of no more than 43%. You may also need to have some cash to pay closing costs for the loan.

The lender will also have your home professionally appraised to make sure it can be sold for what it is worth on paper.

How Much Can You Borrow?

Let’s say your home a professional appraisal would show that your home is worth $250,000.

Most lenders will allow you to borrow up to 80% of your home’s value.

$250,000 x 80% = $200,000.

You still owe $150,000 on this mortgage. This means you could borrow up to $50,000 through a home equity loan.

$200,000 - 150,000 = $50,000

Types of Home Equity Loans

Lump Sum

If you know how much you need to borrow, you could take the loan amount as a lump sum. You will begin payment on the loan immediately with fixed monthly payments. Each payment you make reduces the loan’s balance and covers some of the interest charges.

The interest rate on a lump sum home equity loan is usually fixed for the life of the loan.

Home Equity Line of Credit

If you aren’t sure how much you need to borrow, you could take out a home equity line of credit. A home equity line of credit works similarly to a credit card. You qualify for a certain amount of money based on the equity in your home, and you can borrow up to that amount over a period of time.

Each month, you can choose how much to pay back on the loan. If you have a lot of other expenses that month, you can choose to pay only the interest on the loan. If you have a little extra at the end of the month, you can pay down the principal as well.

What if Your Credit Score Isn’t Great?

If your credit score isn’t high, you may have a more difficult time borrowing against the 80% of the equity of your home.

Check out these five home equity lenders who may lend to you no matter your credit score.

Lending Tree

Lending Tree is a great place to start the process of finding a home equity loan because you will receive up to five offers online in a matter of minutes. In fact, the application tends to take most customers only seven minutes. Since the lenders compete for your business, you can pick the best loan for you.

FHA Rate Guide

FHA Rate guide has been around since 2004. Take four minutes to fill out an application, and four lending institutions will send you quotes in thirty seconds. The FHA Rate Guide is only for customers who would like to refinance their loans. It is not clear if they offer a cash-back refinancing option, which would allow you to have access to the equity in your home.

Rocket Mortgage

Quicken Loans’ Rocket Mortgage offers loans for home purchases, refinances, cash-out, and debt consolidations. It is not clear how many offers you will receive, but the application only takes minutes, and the company has been around for almost 20 years.


You should also try to see what rates are available for a person with your credit history.

Discover Home Equity Loans

Although Discover Home Equity Loans advertises that their loans require no application or origination fees, that might be too good to be true for a credit-challenged person. Check out the details by visiting them online.

A Word of Caution

If you have struggled financially in the past, what are you doing differently now that will ensure you won’t get into trouble by borrowing more money?

Are you willing to put your family home at risk by borrowing against it?

Since borrowing money using your existing home as collateral is risky, most financial advisers would recommend that you only take out a home equity loan to make money.

Could you use it to purchase a lake house? Technically, you could, but will your lake house make money for you? Will you be able to swing another mortgage payment on top of your current one?

Get Help Picking an Investment Property

If you are using the money from a home equity loan to finance the purchase of a second home or investment property, consult with an experienced person in the real estate industry.

If you are investing in an additional property, you need to make sure the new home will grow in value. You do not want to lose your current home because you made a poor choice on an investment property.

To find an expert on investment properties, reach out to one of our Clever Partner Agents from your area. Not only will they help you find the right investment property for your situation, but they will also negotiate for a great price on your behalf.


Ben Mizes

Ben Mizes is the co-founder and CEO of Clever Real Estate, the free online service that connects you with top agents to save thousands on commission. He's an active real estate investor with 22 units in St. Louis and a licensed agent in Missouri. Ben enjoys writing about real estate, investing, personal finance, and financial freedom. He's a serial entrepreneur, having run several successful startups before Clever Real Estate. Ben's writing has been featured in Yahoo Finance, Realtor News, CNBC, and BiggerPockets.

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