Is A Home Equity Loan Possible In This Situation

Q: Over the past year, I've experienced some health problems that forced me out of work. Long-term disability would've been difficult to obtain...a long story that really has no place here. The end result is, via living on my credit cards for the past 12 months, I've accumulated about $35,000 in debt. Some of this was simply living expenses, some of it was paying bills, and some of it was debt accrued when I purchased a house, an event which unfortunately coincided with my health issue. Due to improvements made on the house and twelve months of payments, I have approximately $15,000 in equity on the home. I would like to take out a home equity loan but would prefer to have some knowledge before more inquiries are made on my credit report. My current score is approximately 620 due to the large balances and revolving debt, but I have yet to miss or be late with any payments. Is a home equity loan possible in this situation? I am now back working but would prefer to consolidate at least half of this debt and worry about the remainder in the coming year. Things like appliances and furniture were purchased on 0% finance offers and I'd like to get those paid before I'm hit with back interest. What will be at issue in obtaining one, and will I have an easier time with one bank over another?

A: you have a long term health issue that prevented you from working, and you had to borrow on your credit cards to keep the house afloat. So, what did you do? You went out and bought a bunch of junk (furniture and applianced) on credit!?!? How could you do that? What if you never get better? What if you have a relapse tomorrow and can never work again? I recommend against a home equity loan because it is your spending that is out of control. If you get the H/E loan, you are likely to get back in the comfort zone and charge up a bunch more. Then you will be in the same spot, but with no more equity. The next step is bankruptcy. If you are only going to do that again, I'd like to see you preserve the equity that you have in your home. Its all you have. Given that, I don't think you will have a problem getting a home equity loan with a 620 as long as you have the income to support it. Keep in mind, however, that if you are using the last $15K in equity, that means that you are over the 80% loan to value marker, so you will be in the high-risk area, and have to pay a significantly higher interest rate. If you are set on going this route, go to your local bank, and ask what is possible, and how much it will cost. They can ballpark this without hitting your credit record. .

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