Writer: Choncé Maddox
Editor: Lillian Guevara-Castro
Reviewer: Ashley Fricker
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Key Takeaways
These home equity options may help borrowers with credit scores between 500 and 600 access the cash tied up in their homes.
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Rocket Mortgage is our top pick for getting fixed-rate financing with bad credit.
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For an alternative option with no monthly payments, we recommend Unlock.
A home equity loan is a popular way to finance home repairs, pay off debt, or cover other important expenses. And today, the average homeowner sits on a record $310,500 in built-up home equity.
But, like any loan, a low credit score can make qualifying difficult and limit your funding paths.
Even with a subprime credit score, you still have options for securing a home equity loan. Some lenders are experts in working with folks who have fair or poor credit. They often consider other aspects, like your debt-to-income ratio (DTI), to gauge your creditworthiness.
Best Home Equity Loans For a 500 to 600 Credit Score
Some lenders are willing to approve home equity loans for those with lower credit scores, but the terms might not be ideal. If you’re thinking about a home equity loan, consider these lenders that specialize in credit scores between 500 and 600.
- America’s largest mortgage lender
- The entire process is completed online
- Options for new mortgages and refinancing existing mortgages
- Award-winning customer service and cutting-edge digital platforms
- More than 90% of clients would recommend us
- See application, terms, and details
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 1985 | 5 minutes | 9.5/10 |
Rocket Mortgage is one of the largest mortgage lenders in the U.S. This lender offers home equity loans at a fixed rate, allowing you to keep the same rate on your current mortgage. Rocket Mortgage has home equity loan experts to help you get the cash you need, and with predictable payments you can budget for.
You can easily apply online using a streamlined application process to get an accurate loan quote. Rocket Mortgage specializes in assisting borrowers with poor credit by presenting the loan terms available to you.
During the online questionnaire, you’ll be asked about your credit score range and whether you’ve declared bankruptcy in the past three years.
This information won’t automatically disqualify you from securing a home equity loan. Rocket Mortgage is ready to have one of its home equity loan experts reach out by phone to discuss your options.
2. Unlock
- Access up to $500,000 in home equity with NO monthly payments
- Ability to use funds for any reason
- Minimum 500 FICO required — no impact on your credit score
- No age or income restrictions
- Not available in every state; terms and conditions apply
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| No Interest | 2020 | 10 minutes | 9.0/10 |
Unlock provides homeowners with a different type of financing structure to tap into their home equity — and you can do it without making monthly payments.
The type of financing is not a loan, but a home equity agreement (HEA) that provides homeowners with the funds they need in exchange for a percentage share of the future value of their home.
Borrowers need a FICO score of 500 or above to be eligible, but this structure has some significant benefits — especially if you want to access cash to pay off debt. As opposed to HELOCs and home equity loans, HEAs don’t charge interest or have monthly payments, possibly giving homeowners some much-needed breathing room.
You will need to maintain the property, as well as pay your mortgage and taxes, during the agreement. And Unlock allows you to buy back the equity without selling your property.
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- Buy a home or refinance your existing mortgage
- Cash-out refis and HELOCs available
- Flexible credit requirements
- Up to $8,000 in down payment assistance, see terms.
- Popular with first-time homebuyers See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 2003 | 5 minutes | 9.5/10 |
New American Funding offers cash-out refinancing and home equity line of credit (HELOC) options to help borrowers leverage their equity when they need it. The lender has flexible credit requirements and may work with borrowers who have had issues in the past.
The initial application is straightforward and asks for details about your home, market conditions, income, and credit score range. Once you submit it, New American Funding will quickly provide a decision, and the process is confidential, ensuring your credit score remains unaffected.
Many first-time homebuyers also seek out New American Funding for its popular loan programs and down payment assistance program, which can provide the extra boost to get them into a home.
4. eMortgage
- Get today’s mortgage rates from the top mortgage lenders and banks
- Easily compare and choose mortgage lenders with no obligations or fees
- Review current mortgage rates side by side
- Pick mortgage lenders that meet your specific needs
- Compare rates from pre-qualified and approved mortgage lenders — 100% online, 100% free
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 1979 | 4 minutes | 8.5/10 |
eMortgage is a mortgage matching service with a minimum credit score requirement of 500. To obtain a home equity loan, you can fill out a request form online or call to connect with a loan professional in your area to view your options.
eMortgage makes the loan process faster by connecting you with its network of lenders, letting you compare offers side by side.
Once you see your matches, you can move forward with the loan option that suits you best and either apply online or contact a loan officer.
How Do You Qualify For a Home Equity Loan?
To apply for a home equity loan, you need to meet specific qualifications. Typically, this means having a solid credit score and being up-to-date with your mortgage payments.
Lenders have their own unique criteria for home equity loans, which can vary quite a bit. Some may prefer borrowers with higher credit scores, while others are willing to work with those who have lower scores.
Lenders take into account various factors like your job history, income, and debt-to-income ratio (DTI). Ideally, your DTI should be 45% or lower, meaning you’re using nearly half of your gross income to pay off debts monthly.
Here is an example of how to calculate your DTI based on your income and debt:
| Monthly Debt | Monthly Income | ||
|---|---|---|---|
| Rent | $1,000 | Salary | $3,300 |
| Car Payment | $175 | Side Hustle | $200 |
| Credit Card | $75 | Misc. Income | $150 |
| Total Monthly Debt | $1,250 | Total Monthly Income | $3,650 |
| DTI: $1,250 / $3,650 = 0.34 (or 34%) | |||
It’s vital to ensure that a home equity loan fits your financial needs. You should feel confident about handling the repayments comfortably.
To qualify, you must have some equity in your home. Lenders generally require that you possess at least 15% to 20% equity before applying.
This means if your home’s appraised value is $300,000 and you owe a mortgage balance of $225,000, you have $75,000 in equity ($300,000 – $225,000). This works out to 25% equity in your home ($75,000 / $300,000).
If you initially don’t meet the home equity requirements, you might need to reduce the principal balance on your home loan before trying again. Meeting these qualifications can help you secure the financing needed for home improvements or essential expenses.
What is the Minimum Credit Score Needed to Get a Home Equity Loan?
Most lenders look for a credit score of at least 620 to 680 to qualify for a home equity loan. You may still qualify with a score below 600, but your options will be limited, and you will likely need strong income, substantial home equity, and a low debt-to-income ratio.
Some lenders allow you to prequalify online with a soft credit check to view estimated rates without affecting your credit score. A lender may also assign you a loan specialist who can discuss your options.
If poor credit is holding you back, improving your score can increase your chances of approval. Start by reviewing your credit reports for inaccuracies that may negatively affect your score. You can get free weekly reports from Equifax, Experian, and TransUnion at AnnualCreditReport.com.
Paying down credit card balances can lower your credit utilization and potentially improve your score. Paying down other loans can also reduce your overall debt and debt-to-income ratio, although installment loan balances do not count toward credit utilization.
You can also limit hard inquiries and keep older credit card accounts open to preserve your average credit age. Although keeping your utilization below 30% is a common guideline, lower utilization is generally better.
Consider monitoring your credit score online using free services like Credit Karma. Credit Karma tracks VantageScores rather than FICO scores, but it can still give you a general idea of where your credit stands.
What If You Can’t Afford to Pay Back Your Home Equity Loan?
If you can’t pay back your home equity loan, the lender can foreclose on your property, and you could end up losing your home. Home equity loans are collateral loans, which means your house acts as a guarantee to secure the debt.
Because of that risk, it’s essential to be sure you can comfortably repay the loan and stick to the terms of the agreement. But life can still get in the way sometimes, so if you’re ever having trouble making a payment, reach out to your lender as soon as possible.
The lender may offer deferment options, temporary payment pauses (called forbearance), lower monthly payments, or a partial payment plan to help you get back on track. But you won’t know what help is available unless you ask.
In most cases, federal law requires lenders to wait until you are 120 days behind before starting foreclosure, which gives you time to communicate and try to work out a plan.
Here is a quick breakdown of what happens when you miss payments and how your lender can help:
| Situation | What’s Happening | Your Best Immediate Move | Relief Program to Ask For |
|---|---|---|---|
| 1-30 Days Behind | Grace period ends; late fees apply | Call your loan servicer right away | Grace Period Extension: Asks for a few extra days without penalties. |
| 30-90 Days Behind | Credit score takes a severe drop (60–100+ points) | Submit a financial hardship application | Forbearance: Pauses or temporarily lowers your monthly payments. |
| 120+ Days Behind | The lender can legally start foreclosure | Speak with a HUD-approved housing counselor | Loan Modification: Permanently lowers interest or extends the term to cut payments |
Missing a payment by 30 or more days will negatively impact your credit history, but the biggest risk is falling behind for four months or more. That’s when you run the real risk of losing your home.
If you feel this risk is too great, you may want to consider an unsecured loan, such as a personal loan.
How Does a Home Equity Loan Differ From a HELOC?
A Home Equity Loan gives you a single cash payout upfront using your home as collateral. This means you will need to make fixed regular payments on the entire loan balance within a set period (usually five to 30 years).
A Home Equity Line of Credit, or a HELOC, works a bit differently. Think of it like a credit card: you get a credit line backed by your home and can draw from it as needed. You’ll only pay interest on the amount you borrow, giving you a little more flexibility than with a home equity loan.
Typically, HELOCs have a draw period of up to 10 years, and then a repayment period of 10-20 years. Many HELOCs will also allow you to pay just the interest on what you borrow during the draw period, but when that ends, you’ll pay the interest plus the principal, which could make your monthly payment spike dramatically.
A Home Equity Agreement, also known as an HEA, is a non-loan option that can provide cash now, but how much you pay back can vary wildly.
Instead of taking on more debt, an HEA gives you cash upfront in exchange for a piece of your home’s future value. There are no monthly payments and zero interest charges.
You simply settle up down the road (usually within 10 to 30 years) when you sell the home, refinance, or buy out the company’s share.
So, what’s the catch? It can cost a lot more in the long run — or it might not. Because the company owns a percentage of your home’s future worth, if your property value soars, you could end up paying back two to three times more cash than the amount you originally received.
The major difference among all three comes down to how you get your money, how you pay it back, and how hard they are to get if your credit isn’t great.
| Option | Payout | Repayment & Term | Best For |
|---|---|---|---|
| Home Equity Loan | Upfront lump sum | Fixed monthly payments (5–30 yrs) | Lump-sum needs and predictable budget |
| HELOC | Line of credit | Interest-only draw (10 yrs), then principal + interest (10–20 yrs) | Ongoing projects and those with good credit |
| HEA | Upfront cash | $0/mo; pay share of home value at sale/refinance (10–30 yrs) | Credit in 500s with no room for a monthly bill |
Home equity loans are typically best if you need a lump sum of cash right away and can handle steady monthly payments, while HELOCs are better suited for ongoing projects if your credit is in solid shape.
HEAs are a great fit if your score is in the 500s and you need cash, but can’t afford another monthly bill. It’s also essential to compare rates, fees, and terms from different companies to get the best deal.
Ultimately, finding the right loan for you hinges on your financial needs and goals. Make sure to explore all your options thoroughly before you decide.
Shop Around For the Best Rates
Unlike personal loans, home equity loans require you to use your home as collateral. While they can be a great way to handle urgent expenses and home repairs, options are limited if your credit score falls between 500 and 600.
This list of home equity loans for borrowers with a 500 to 600 credit score is a great place to start. Some of these lenders may have a lending partner that works with borrowers with bad credit.
Before applying, be sure to shop around and compare rates online, know your FICO credit score, and estimate your home’s value to ensure you have enough equity to qualify.
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