Best Home Equity Loans With Bad Credit in 2026

January 28, 2026 W.A. Muller

A home equity loan is funding you get from a lender using your house as collateral. Imagine Mr. Peter owns a house worth $300,000, though he still owes $200,000 on his mortgage. His equity (home value – mortgage) is $100,000, but he wants to renovate his kitchen and garden. So, he asks his bank for a cash advance for home improvements using his house’s equity as collateral.

If approved, the bank might give him $50,000 as a lump sum, but there is a problem: he has a low credit score. And this is about to deny him the money he seeks, as his weak credit history signals higher default risk to the lender.

If you are in a similar situation, you can get a home equity loan with bad credit if you have a large amount of equity or a low debt-to-income ratio. What you need now is a lender offering home equity loans for bad credit.

So, does it mean that it is possible for homeowners to get a home equity loan with bad credit? Keep reading to find out.

Can You Get a Home Equity Loan with Bad Credit?

Yes. It is possible for homeowners to get an equity loan with bad credit from home equity lenders, but it will not be easy. Each home equity lender has its own rules and terms because they see bad credit as a big risk. However, the few that will agree to give you funds will charge higher interest or tighten funding terms.

On the other hand, each lender accepting your loan applications has a set FICO score they accept, and most accept one in the “fair” range category.

Credit Score

Implication

300 to 579

Poor

580 to 669

Fair

670 to 669

Good

670 to 739

Very Good

800 to 850

Excellent

Furthermore, home equity lenders that accept fair credit scores demand that homeowners meet certain eligibility requirements. These include the borrower having the following:

Low loan-to-value ratio or LTV ratio
Strong income
Significant home equity
Co-borrower

Minimum Requirements for Home Equity Loans

Credit score expectations: Lenders expect a borrower to have a minimum credit score in the mid‑600s (maybe 620 to 680) to qualify for home equity financing.
Home equity percentage: A lender expects the borrower’s home equity percentage to be between 15% and 20%.
Debt‑to‑income ratio: It is expected that a borrower’s total monthly debts compared to their income (DTI) be around 43% or lower. This range assures the lender that you can repay.
Proof of income: These are documents displaying a borrower’s income information. It tells the lender how stable your income is, which in turn shows if you can repay or not.
Property type and condition: The lender will want to know the condition of the residence you are using as collateral.

Why Home Equity Loans Are Harder to Get with Bad Credit

The 2008 financial crisis played a major role in why getting home equity funding with bad credit became hard for homeowners. The inability of borrowers to make their mortgage payments and equity loans resulted in mortgage lenders selling their houses to recover debts (Foreclosures). Most lenders lost the loaned money and the collateral; this became an eye-opener for home equity lenders.

Later, reforms like the Dodd-Frank Act introduced rules to prevent risky lending. And since then, borrowers with low credit face high mountains each time they try to apply for home equity funding. Lenders demand high interest and strong financial profiles from borrowers. Other requirements they demand include:

15 to 20% equity of your residence
Lower loan-to-value (LTV) ratio (meaning you can borrow less against your home value),
They require you to have a low (43% or lower) debt-to-income ratio (DTI).
Proof of income and documentation like tax returns, bank statements, and other financial documents.
A co-borrower or cosigner to improve your approval chances and terms.

On the other hand, the lender giving you this home equity loan with bad credit is entitled to risks like the popular foreclosure risks. The additional legal fees, administrative costs, taxes, maintenance, and other holding costs before selling the property reduce what the lender recovers.

Home Equity Loan vs HELOC vs Personal Loans (Bad Credit Comparison)

Loan type

Credit score flexibility

Interest rate range

Risk to the home

Approval speed

Home Equity Loan

Moderate

Lenders prefer a fair/good score
Harder with bad credit

Lower (lower than personal funding)

High

Your house can be foreclosed

Slow

Requires intense documentation

HELOC (Home Equity Line of Credit)

Moderate

Sometimes slightly stricter due to variable risk

Lower than unsecured funding

High

Foreclosure risk if you don’t repay

Slow

Appraisal and underwriting take time

Personal Loan

More flexible

Lenders often accept fair credit, making it easier for bad credit

Wider range

Higher than home equity options

Low

Unsecured, no risk to your house

Fast

Often, within days with minimal documentation

Note: Personal loans are often chosen over home equity funding by borrowers because they pose no risk to your place. Again, lenders focus on basic credit history, and funding is fast with less paperwork.

Best Lenders & Alternatives for Bad Credit Borrowers

CreditCube

CreditCube is one of the top lenders you can get funds from if you need a home equity loan with bad credit. This online lender is known to offer quick, unsecured short-term installment loans. A borrower’s credit score is not the main eligibility requirement; instead, income and repayment history are considered.

Although the interest rate or APR is high, CreditCube is a top alternative when traditional equity lenders reject your application due to bad credit.

No home equity is required.
Fast online installment funding
Flexible repayment terms
No prepayment penalties

ACE Cash Express

ACE Cash Express is another top alternative for bad credit that you can trust for short-term funding. It offers payday and installment loan options in online and physical stores. And fast loan approval is one of the reasons most borrowers prefer this lender.

Just like CreditCube, they consider the borrower’s employment and income status, but the interest can be high.

Short-term financing
Fast funding and no prepayment fees
Simple application that doesn’t always require traditional credit checks.
Physical locations + online access

Spotloan

Spotloan is the lender to contact if you need short-term funding to meet an immediate need. This lender provides unsecured installment loans for unexpected personal expenses. They focus on borrowers with lower credit scores, but you must have a steady income and a great banking history.

On the other hand, Spotloan is a high-cost option intended for urgent needs rather than long-term borrowing.

Designed for poor credit borrowers
Higher APRs, fast approval
Repayments can be spread out.
Online application process

Uprova

Uprova is another lender for short-term funding and a great alternative for borrowers looking to get home equity loans with bad credit. It stands out as one of the best online personal financing firms that gives installment loans with a simple application process. You don’t have to have a good credit score to get the financing, making it one of the top alternatives for borrowers.

Fast, online installment loans
Credit-building opportunity
Fixed repayment terms
Small to mid-size loan amounts

Speedy Cash

Speedy Cash is a top alternative for bad credit borrowers because of its multiple funding types. You can choose from cash advances, payday loans, and short-term installment loans. And all are available for borrowers with low credit.

This is one of the experienced lenders with decades of service, serving millions of customers. While interest rates are on the high side, the funding application process is fast.

Approves credit for borrowers with poor credit history.

Fast application and funding
Online and storefront support and customer service availability

Risks of Using Home Equity with Bad Credit

Approaching a lender with poor credit makes you a risk, making lenders impose stricter loan terms. Below are the risks you may face when using home equity with bad credit.

Risk of losing your house if you fail to repay
High home equity loan rates
Extra fees and closing costs
Long-term financial impact, since equity loans with bad credit make it harder to save.

Safer Alternatives to Home Equity Loans with Bad Credit

Applying for an equity loan with bad credit is risky for the borrower. But there are safer alternatives for bad credit scores, and they are

Installment loans: These are unsecured personal loans with fixed monthly payments.
Credit union personal loans: Lenders offering lower rates and fees, including Payday Alternative Loans (PALs).
Secured loans (non-home collateral): A Loan backed by non-home assets that helps you build credit scores.
Credit-builder strategies before applying: Using certain tools (e.g., secured credit cards, credit-builder loans, and on-time payment tracking) to build a credit score.

How to Improve Approval Chances Before Applying

Reduce credit utilization: Try to lower the percentage of the available credit below 30% at least.
Fix credit report errors: Ensure you check and dispute any inaccuracies in your credit report before applying.
Pay down existing debt: If possible, pay down debts to improve your debt-to-income ratio. It helps your profile and makes you look reliable to lenders.
Increase equity: Show financial strength by building more savings or asset value you can use as collateral.
Compare lenders carefully: Ensure you compare lenders’ loan terms to find the best that is likely to approve you.

FAQs

Can you get home equity if you have bad credit?

Yes. Some lenders can give you home equity loans with bad credit, but be prepared to pay a higher interest rate.

What is the lowest credit score for a home equity loan?

The lowest credit score for a home equity Most lenders prefer is around 620 to 680. Lenders that consider lower scores check if you have consistent income options.

Where is the best place to get a home equity loan with bad credit?

Smaller banks, credit unions, or online lenders that specialize in bad‑credit borrowers are your best bets.

How much would a $50,000 home equity loan cost a month?

There is no static cost, as payments will vary depending on the home equity loan rate and term. Let’s say a $50,000 home equity loan is at 8% interest over 10 years. It would cost about $607 per month.

What are the alternatives to a home equity loan?

The best alternatives you can find include cash‑out refinance and home equity line of credit (HELOC), as well as other options that do not require using your residence as collateral, such as personal loans or credit cards.

Conclusion

Getting a home equity loan with bad credit is possible, but it comes with real risks. You will pay a higher interest rate and can even lose your abode in the process. So, before applying, consider all borrowing and repayment options. And weigh the risks against the benefits.

If you are not convinced, take personal or installment loans or use a credit builder to boost your credit score. Remember, a safer equity funding option will solve your emergency and protect your home equity.

This article was written by Peter Emmanuel Chijioke, a professional SEO writer, financial trader, and contributor to Traders Union. He specializes in personal finance, business loans and automation, Forex, cryptocurrency, stocks, and other related financial niches. With over seven years of experience in financial trading and a background in computer science, he creates clear, data-driven content that helps investors understand complex financial technologies