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Equity Line of Credit Bankruptcy

An equity line of credit is one of the few sources of finance that maybe available to those who have a bankruptcy on their record.

Lenders might be willing to make an equity line of credit available to those with a history of bankruptcy because an equity line of credit is secured. In a secured line of credit a piece of physical property such as real estate or machinery is used as collateral. If the borrower doesn’t pay the lender can simply seize the property.

How Equity is Determined

The amount of credit available in an equity line of credit bankruptcy is determined by the value of the property used as collateral. If the property is worth $10,000 then $10,000 credit maybe available.

Borrowers should remember that the value of property used is the market value which is usually much lower than the price the item sold for originally. Some equity lenders may offer less than the market value so they can make a profit by selling the item.

It could be difficult to find an equity line of credit on some items such as specialized equipment used in business. In many cases people will have to take such items to the pawn broker and get only a small loan.

Real Estate Equity Lines of Credit Bankruptcy 

The easiest equity lines of credit to get are those on real estate such as homes and business property. The way a real estate equity line of credit works is quite simple, the lender bases the amount of credit available on the value of the property.

Equity on real estate is determined by the amount by which the value of the property exceeds the amount the property is mortgaged for. If a property were mortgaged for $100,000 but worth $200,000 the owner would have $100,000 worth of equity available.

Equity lines of credit are preferable to a mortgage because with this method of financing you only have to pay back the money you actually borrow. That means a person can limit the amount of debt they have and their interest rates and mortgage payments.

Drawbacks to Equity Lines of Credit Bankruptcy

Those who have a bankruptcy on their record will usually have to pay much higher interest rate on equity lines of credit. Lenders will charge a higher interest rate in this case because they consider persons who have undergone bankruptcy a higher risk.

The number of lenders who will make equity lines of credit available to people who have a record of bankruptcy is also limited. Most banks will not lend to such people so individuals who have a history of bankruptcy will have to go to online and private equity lenders for a line of credit.

There are many online lenders that will make lines of credit available to those with a history of bankruptcy. These lenders will charge much higher interest rates and may require a borrower to set up a strict payment plan. Such a payment plan might require the borrower to pay a certain amount each month.

Finding a Equity Line of Credit Bankruptcy

The best place for a person with a record of bankruptcy to look for an equity line of credit is online. There are many online lenders that will make equity lines of credit available to almost anybody. These lenders are willing to do this because making equity lines of credit available to such people can be highly profitable.

By running a simple online search using the term equity line of credit bankruptcy, a person should be able to locate several lenders willing to make such financing available to anyone.