Home Improvement Loans Without Equity

The no-equity lending trend really took off in 1997 and it has made it possible for homeowners to borrow more than their home is actually worth-something that was unheard of before this trend began. A no-equity home loan is simply a confusing name for a high loan-to-value (LTV) home-equity loan, in which the amount you're borrowing surpasses your home's total value — often by as much as 25%. This creates a sort of a hybrid secured/unsecured loan. Not surprisingly, these risky loans are aimed at the truly cash-strapped.

Although borrowers can have very little equity in their homes to qualify, and some lenders will tolerate a debt-to-income ratio of up to 55%, borrowers must still meet strict requirements for credit worthiness. In addition, to qualify for a no-equity loan, borrowers also need good incomes, steady jobs, and, of course, the good payment histories required to get the high FICO scores.

The biggest drawback to these loans, however, lies entirely within the habits and circumstances of the borrowers themselves. While consolidating expensive credit card bills into one no-equity loan may be a very wise financial decision, the benefits of lower payments will be rapidly undone if the borrower continues to take on new debt