In 2025, homeowners with poor credit can still access funding through lenders who approve home equity loans for borrowers with poor credit, offering flexible credit requirements and loan terms. Options like FHA Title I, Spring EQ, and Figure evaluate factors like income and equity, not just credit score. These loans provide lump-sum payouts, lower rates than personal loans, and longer terms—making them a practical choice for debt consolidation or home improvements.
What Are Home Equity Loans for Bad Credit?
A home equity loan lets you borrow against the equity in your home—your property’s value minus what you owe on your mortgage. Lenders typically prefer borrowers with good credit, but in 2025, select lenders specialize in bad-credit borrowers, using factors like income stability, home value, and debt-to-income (DTI) ratio to make approval decisions.
Pro Tip: While credit score still matters, lenders now often accept scores as low as 580 if you meet other criteria.
Why Bad-Credit Home Equity Loans Matter in 2025
For homeowners with poor credit, access to funds can be limited. A home equity loan gives you a way to leverage the value of your property—even when traditional lenders say no.
Top Benefits:
- Lower Interest Rates Than Personal Loans: Since your home secures the loan, interest rates are often lower.
- Lump-Sum Payout: Useful for major expenses like renovations or debt consolidation.
- Longer Repayment Terms: Some lenders offer up to 20 years, reducing monthly payments.
Key Challenges:
- Risk of Foreclosure: If you can’t repay, your home could be at risk.
- Equity Requirement: You typically need at least 15–20% equity in your home.
Top Lenders for Home Equity Loans With Bad Credit in 2025
Here’s how the top providers stack up this year:
Lender |
Credit Score Min. |
Max LTV |
Loan Amount |
Key Benefit |
| FHA Title I Loans | None (depends on lender) | Up to 90% | Up to $25,000 | Federally backed, good for home improvements |
| Spring EQ | 620 | Up to 90% | Up to $500,000 | Fast approval, flexible terms |
| Figure | 620 | 85% | Up to $400,000 | 100% online, quick funding |
| U.S. Bank | 660 | 80% | Up to $750,000 | Trusted traditional lender with competitive rates |
Note: Lenders vary by state and property type. Always compare terms and fees.
How to Get a Home Equity Loan With Bad Credit
Follow these steps to improve your chances:
Step 1 – Check Your Credit Report
Fix errors and understand your standing.
Step 2 – Calculate Your Home Equity
Use online tools or get an appraisal.
Step 3 – Compare Lenders
Look beyond rates—consider fees, terms, and approval criteria.
Step 4 – Gather Documentation
Include income proof, mortgage statements, tax returns, etc.
Step 5 – Apply
Prequalification won’t hurt your credit and gives insight into approval odds.
FAQs
Can I get a home equity loan with a 600 credit score?
Yes. Some lenders accept scores as low as 580, though you may face higher interest rates.
Do bad credit home equity loans require income verification?
Yes. Lenders want to see stable income, even if your credit is poor.
Is it better to get a HELOC or a home equity loan with bad credit?
It depends. HELOCs offer revolving credit but may have variable rates. Loans offer fixed terms and payments.
Will applying hurt my credit?
A hard inquiry may slightly lower your score, but prequalification is usually a soft pull.
Final Thoughts
Bad credit doesn’t mean you’re out of financial options in 2025. By tapping into your home equity and choosing the right lender, you can secure funding on fair terms. Be sure to compare lenders, understand risks, and focus on sustainable repayment.
Need help deciding? Talk to a lending expert or check out our lender comparison tool for real-time quotes tailored to your profile.