Home equity loans have a lot to do with home values and they were once incredibly easy to obtain, but banks have since become more stringent on who they choose to approve, making it harder for homeowners seeking to perhaps make a home improvement or take care of a costly repair. Back in 2006, home equity lending was over $400 billion. Fast forward to 2013 and that number had dropped considerably to $60 billion. If you’re finding yourself in a scenario where you’re looking to obtain a home equity loan there are potentially ways to still receive approval.
Bankruptcy is a major factor in getting denied for a home equity loan, or any loan for that matter. In this case it’s imperative that your credit be as strong as possible. Even with a bankruptcy on record, having a strong credit score can sway a bank to possibly approve you for a home equity loan. However, do keep in mind that you may run into higher interest rates than someone who has not filed for bankruptcy.
Before you choose to apply for a loan, you may want to take a look at whatever balances you currently have, regardless of how much equity you may have. If you can pay off a significant amount of your credit card debt and thus reduce your debt-to-income ratio, this will also boost your odds of getting approved.
Also take a look at just how much money you’ll need. If your needs involve a new roof, or you’re looking to expand your home then a home equity loan makes sense. On the other hand, you may want to explore a home equity line of credit (HELOC) where you can request smaller amounts than a home equity loan.