Can you get a home equity loan with no credit check?

When you need to borrow money, your home can be an attractive source of flexible and affordable funds. It can also be easier to get approved for a home equity loan compared to unsecured options like credit cards and personal loans.  

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Even so, it can be tough to get approved for a home equity loan if you have a very low credit score, credit challenges such as recent loan defaults or bankruptcies, or if you don’t have any credit at all. However, there are still options. We’ll cover some viable solutions for homeowners with credit challenges. 

What are the requirements to get a home equity loan?

Home equity loans, like all equity financing products, rely on using your home as collateral to ensure the loan is repaid in the event of default. Lenders will still check your creditworthiness when you apply for a home equity loan, however, since no one wants to go down that road. It’s not just a good business idea either; verifying your ability to repay the loan is also the law. 

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Individual lenders vary in terms of the hard limits they set on who they’ll approve for a loan. In general, however, most lenders are looking at the same three factors:

Loan-to-value (LTV) ratio

The percent of your home’s value that is secured by all debts, including mortgages, HELOCs, and your potential home equity loan. Most lenders limit borrowers to an LTV ratio of 80% to 85%, although some may allow well-qualified borrowers to go as high as 100%. If you have a mortgage, this means that you generally aren’t able to take out a home equity loan until you have at least 20% equity in your home.  

Debt-to-income (DTI) ratio

Lenders will also verify that you have enough money left over each month to make home equity loan payments on top of your already-existing debts. They do this by calculating your DTI ratio: your total monthly debt payments divided by your total monthly income. You’ll generally need a debt-to-income ratio of 43% or less to qualify for a home equity loan. The lower your DTI ratio, the better your chances of getting approved. 

Credit score and credit report

Virtually all lenders will check your credit at some point during the application process. They’re looking for two things: your credit score and what’s listed on your credit report. 

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Generally, most lenders require a credit score of 620 or higher in order to get approved. During the first quarter of 2023, however, the majority (54%) of home equity loan borrowers had a credit score of 760 or higher. Many lenders also weed out applicants who have certain negative marks on their credit report within a certain period, especially bankruptcies and defaults. 

Can you get a home equity loan with no credit check?

It may be possible to find a home equity loan — no credit check needed — but in general, for most people, it’ll be difficult or impossible to find a lender willing to work with you without checking your credit first. Your credit report is a record of how good you are at repaying your debts, after all, and that’s the first thing anyone will want to see before handing over a large amount of money. 

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However, there are still ways to get approved for a home equity loan if you’re willing to be flexible. 

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How to get a home equity loan with poor credit

If you’ve been rejected for a home equity loan already or you think you’ll have a tough time in qualifying, there are some steps you can take to ensure you’re still able to access the funds you need. Consider these options first:

• Check your credit report: You can get a free copy of your three credit reports once per year or anytime within 60 days after you’re denied a loan based on your credit. Check it to make sure there aren’t any errors on it, and if so, submit a dispute to remove them. 
• Look at your DTI ratio: Even if you’re not denied solely based on having a high DTI, it can be enough to sway a lender to deny your loan. Work on lowering your DTI before applying again. 
• Check your home equity: If you haven’t already done so, calculate your home equity to see if you’re able to stay under a lender’s LTV limits. Tally up the balance of any mortgage or HELOC you have, then divide that by your home’s estimated value.
• Get a co-signer: Many lenders will approve you for a home equity loan if you can find a co-signer who can meet lending criteria. Your co-signer doesn’t necessarily have to be listed on the title with you, but it does require a high degree of trust between you. 
• Reach out to credit unions: These non-profit banking institutions often are more lenient when it comes to home equity loan requirements. You’ll need to join to receive funding, but you can still scope out your home equity loan options before joining. 
• Get prequalified with multiple lenders: It’s wise to shop around for any loans, and getting prequalified is how you can see your likelihood of approval and your potential financing costs. Most lenders offer this, and it’s a good way to compare options.

Home equity loan alternatives

In most cases, it’s worth taking some time to work on your finances and credit profile to improve your chances of getting approved for a home equity loan. Not only will it be easier to get approved, but you’ll likely be offered better rates and be less at risk of defaulting on the loan. That’s a scenario you really want to avoid, which can result in your lender foreclosing on your home. 

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That said, it’s not always possible or practical to boost your credit and finances, especially within the time frame that you need the funds. If you’re able to handle some of the drawbacks, consider these options:

Home equity investment (HEI)

Home equity investments (HEIs) are an alternative way to borrow against your home equity. Rather than taking on debt, an HEI can offer you funds now in exchange for a slice of your home’s value in 10 to 30 years. Since an HEI is repaid in full later, you won’t need to make any payments in the meantime. 

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As a result, HEIs typically have much lower credit score requirements than traditional loan-based products. Point, for example, only requires a minimum credit score of 500 or higher in order to get approved for an HEI, assuming homeowners meet other eligibility requirements. 

Personal loans for bad credit

Personal loans are general-purpose loans that can be used for just about anything, similar to home equity loans. These loans aren’t secured by your home equity, so they often are more expensive and difficult to qualify for — but on the flip side, you don’t run as high a risk of foreclosure if you default on the loan. Personal loans tend to vary greatly depending on where you look, so try looking with online lenders and credit unions, in particular, to find easier-to-qualify-for funding options. 

Payday loans

Payday loans are short-term, small-dollar loans designed to be paid back at your next paycheck. These loans often feature exorbitant interest rates, and lenders make it easy to become trapped in a debt cycle. For that reason, these loans are typically a last-ditch option. Although payday lenders don’t check your credit, they also don’t report your payments to the credit bureaus either, meaning you can’t use them as an opportunity to build better credit. While a payday loan may be an option for you, proceed with extreme caution.  

Title loans

Title loans operate similarly to payday loans, featuring small funding amounts that are designed to be paid back very quickly in exchange for the title to your vehicle while the debt is outstanding. If you don’t repay the loan, you risk losing your car. Title loan lenders also don’t check your credit, nor report your payments to help you build credit. 

Reverse mortgage

If you’re at least 62 years old, you may be eligible for a reverse mortgage that pays you funds from the equity you’ve built up in your home. You may be able to access these funds in the form of a lump sum (similar to a home equity loan) or as a line of credit. Lenders may check your credit report; however, there is generally no minimum credit score or income requirement since payment will eventually be secured from your home, not from you directly. 

Government and non-profit assistance programs

Depending on why you need the funds and your individual circumstances, you may be eligible for grants and other financial assistance from government agencies and charities. For example, if you lost your job, you may be able to sign up for Unemployment Assistance or Temporary Assistance for Needy Families (TANF). 

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The list of potential assistance options is endless since they’re often locally based. To find out what’s available in your area, try calling or reaching out to 211.org in order to get personal, anonymized help from a volunteer coordinator in your area. 

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Final thoughts

Deciding on the best way forward if you need funding but aren’t able to pass a credit check can be tricky. Waiting to borrow money until you can build a stronger credit score and income stream can be your best bet, but there are other options if you need funds to help turn your financial situation around. A Home Equity Investment (HEI) from Point does not have monthly payments, and you may be eligible with a credit score above 500. 

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Don’t forget to consider your long-term financial plans, too, especially if you’ll be applying for more credit in the future. Taking on debt now might be more expensive, but it also offers you a quicker path to building credit.  

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If you need help sorting out your options, consider hiring a financial advisor or — if you can’t afford one — working with a credit counselor. You can get a referral to a reputable organization through the National Foundation for Credit Counseling. 

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