It is only to be expected that bad credit borrowers seeking to finance either the purchase of a new home or a mortgage restructuring program, would seek the most obvious route open to them. But getting home loans with bad credit is not easy, and lenders often turn such applicants down.

If that is the case, then what is the best alternative? Surprisingly, seeking a home equity loan, or even personal loan, with bad credit is sometimes a more fruitful course than the home loan option. But there are terms and conditions to each that make them suitable to specific borrowers more than others.

Still, as alternative home thehiltonian financing options, both can play a key role in helping to improve the chances of securing a home, or alleviating the pressure a current mortgage loan is creating. But what are the details of both options that make them suitable alternatives?

Home Equity Loan Option

Also known as private home equity loans, this option involves offering up a share of existing home equity as collateral in the loan deal. Private lenders are those certified lending firms that are independent of any banks or large lending institutions. But they can play a key role in securing a home loan with bad credit.

When seeking a personal loan with bad credit, equity can also be used, but it has to match the total value of the loan being sought. However, in this case, just 25% of the loan needs to be covered by the value of the equity. So, a $100,000 loan needs $25,000 in equity.

That makes the deal more affordable, as the level of risk is lowered so the interest rate charged falls. After all, just $75,000 of the loan is actually unsecured. So, as an alternative home financing option, this is a highly affordable one.

Personal Loan Option

It can be very difficult to secure a personal loan that is large enough to match the typically sized home loan, with bad credit usually forcing the loan limit to be set quite low. However, in the right circumstances, these loans can be as high as $50,000, and can be used to greatly improve the chances of a home loan approval.

A $50,000 fund can be extremely useful when trying to clear existing debts in an attempt to increase credit scores, lower interest rates and improve the debt-to-income ratio (which is arguably the most influential factor in any loan application). And getting a personal loan with bad credit is not very difficult with collateral provided. So, some equity or other property can be used.

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