Can You Get a Home Equity Loan With Bad Credit?
Yes, you can get a home equity loan with bad credit — but it can be tricky. Most lenders require at least a 620 to 680 credit score. They’ll also want to see more home equity and less total debt than they would if you had good credit. If you’re approved, expect higher interest rates and stricter terms.
Despite this, a home equity loan can still be a smart move, especially if the payout will help you consolidate debt, make essential home improvements or achieve other financial goals.
We’ll go over the requirements and share a list of lenders to consider if you’re searching for a home equity loan with bad credit.
How to qualify for a home equity loan with bad credit
Make no mistake about it: Home equity loan requirements are stricter than traditional mortgage requirements. Add a credit score below 680 into the mix, and you should expect to offset the weaker score with both a lower debt-to-income (DTI) ratio and loan-to-value (LTV) ratio.
Based on LendingTree data, borrowers with credit scores below 680 received offers in X% of cases and rates were on average Z% higher than those with good credit. Those with a score below 620 received offers Y% of the time with rates that were on average W% higher than borrowers with good credit.
| Typical home equity loan requirement | What may be required for those with bad credit | |
|---|---|---|
| Credit score minimum | 620 | TK |
| DTI maximum | 43% | TK |
| Home equity minimum / LTV maximum | 85% | TK |
How to improve your approval odds
Lenders don’t look at your credit score in isolation, which means that it can be possible to compensate for a lower score with other factors. For example, if you have a low LTV ratio or strong income relative to your debt, a lower credit score may be acceptable.
Shopping around can also help increase your chances. Applying directly to one lender means you either qualify or you don’t. With LendingTree, multiple lenders can review your financial profile at once, which can increase your chances of receiving at least one offer — even with a lower credit score.
Learn more about how to shop for a mortgage.
Should you get a home equity loan with bad credit?
When it makes sense
- You have significant equity. Lenders may be more flexible with lower credit scores when you have a strong equity position.
- You’re consolidating high-interest debt. If you’re replacing credit card debt with a lower-rate loan, consolidating can reduce your monthly payments and total interest.
- Your income is stable and predictable. A steady income makes it easier to qualify and reduces the risk of falling behind on payments.
- You’ve fixed the root cause of your credit issues. If your credit score dropped due to a one-time event (like extensive medical bills or a temporary job loss), a home equity loan may help you move forward financially.
When it’s risky
- You’re struggling to keep up with your bills. Missing payments on a home equity loan could put your home at risk of foreclosure, so it’s important to know that you can stay current on your payments.
- You’re using it for nonessential spending. Borrowing against your home for discretionary expenses (like travel, hobbies or shopping) increases the risk of financial trouble down the road.
- You don’t qualify for a meaningfully better rate. If you want to consolidate debt, but your home equity loan rate isn’t much lower than your existing debt, the benefit may be limited.
- Your debt-to-income ratio is already high. Taking on a home equity loan doesn’t eliminate your debt; it just restructures it. If you don’t address the underlying financial pressure, taking on yet another loan can just make your situation harder to manage.
How to get a home equity loan with bad credit: 6 steps
1. Gather information about your current mortgage
Home equity lenders will need a copy of your most recent monthly mortgage statement before they’ll make a final home equity loan offer.
2. Check your home’s value
If you’re not sure how much your home is worth, you can use a home value estimator or get a broker price opinion. However, the lender will usually order a home appraisal to confirm the value, so any valuation you get before that should be considered an estimate.
3. Calculate how much you might be able to borrow
Once you know your home’s value and your current mortgage balance, use LendingTree’s home equity loan calculator to estimate how much you may qualify to borrow. It can help you decide whether the full application is worth the effort.
Lenders calculate your maximum home equity loan amount by multiplying your home’s value by the max LTV ratio they allow, and then subtracting your outstanding mortgage balance.
4. Write letters of explanation for your bad credit in advance
If you’ve had some tough financial times, write a letter to explain to lenders what happened and how you’ll be able to repay a home equity loan. Be prepared to provide documentation — such as bankruptcy papers or divorce decrees — that helps explain your financial situation.
5. Apply with three to five home equity lenders
You may need to show extra patience and shop around to get a home equity loan with bad credit, since not all lenders offer them. LendingTree can save you time by allowing you to enter your information once and receive offers from multiple lenders who want your business.
6. Provide your documents and close your home equity loan
Once your home equity loan is approved, the process is similar to getting a traditional mortgage. The lender verifies all the information from your application and, once it’s finalized, you’re ready for closing. After you sign your paperwork, you’ll receive the funds from your home equity loan at the end of your right-to-cancel period, which lasts for three business days.
How to find the best bad credit home equity loan lenders
The best way to find a home equity loan is to comparison-shop with at least three to five lenders. Below are several lenders that accept lower-than-average credit scores, some of whom also appear on our list of the best home equity lenders of 2026:
| Lender | LendingTree’s rating | Min. credit score | Max. LTV | Max. DTI | |
|---|---|---|---|---|---|
 |
Expert review from LendingTree.
| 640 | 90% | Not disclosed | |
 |
Expert review from LendingTree.
| 680 | 90% | 45% | |
 |
Expert review from LendingTree.
| 700 | Not disclosed | Not disclosed |
Pros and cons of a home equity loan with bad credit
Pros
- Low rates: Interest rates are typically lower than personal loan or credit card interest rates
- Quick funding: Funds are disbursed quickly (typically two to six weeks) and can be used for any purpose
- Predictable payments: Fixed-rate payments stay the same for the life of the loan
- Tax benefits: Interest may be tax-deductible if used for home improvements
Cons
- Fees and costs: Interest rates and monthly payments will be higher than if you had a good credit score
- Loan limits: You may be limited to a smaller loan amount because your credit score is lower
- Foreclosure risk: Lenders could foreclose and you could lose your home if you default
- Tax implications: Interest isn’t tax-deductible if it’s used for anything besides home improvements
A home equity loan is riskier for a lender because it’s a “second mortgage,” which means it’s repaid after your first mortgage if you default on your loan. If there’s no money left after the first mortgage is repaid, the second mortgage lender stands to lose a lot of money. Lenders guard against this increased risk by charging more in interest, but you should still shop around to ensure you get the best rate.
What happens if I’m denied?
If you’re denied a home equity loan, it just means you don’t meet that lender’s requirements right now, not that you’ll never qualify. Most denials are due to credit score, home equity or debt-to-income (DTI) ratio issues. Recent negative credit events (like late payments, having debts sent to collections or bankruptcy) can also hurt your chances.
What should you do after being denied?
1. Review your denial notice
Lenders are required to tell you why you were denied. Look for specific reasons like:
- “Insufficient equity”
- “High DTI”
- “Credit history concerns”
This will help you know exactly what you need to fix before applying again. If you need help understanding the reasons you were given or strategizing on how to improve your finances, reach out to a housing counselor.
2. Strengthen your application
Depending on the reason, you can improve your chances by:
- Paying down existing debt to lower your DTI ratio.
- Making on-time payments for several months to improve your credit score.
- Correcting errors on your credit report.
- Waiting after major negative events like late payments or bankruptcy. You may have to wait two to five years, depending on your situation.
3. Consider applying with a different lender
Some lenders specialize in working with borrowers who have lower credit scores, higher LTV or DTI ratios or non-traditional credit profiles. That said, it’s important to compare offers carefully because these loans often come with higher rates and fees.
Are there alternatives if you can’t qualify?
If you’re denied, you may want to consider these home equity loan alternatives:
Read more about the alternatives to a home equity loan at our home equity loan requirements page.
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