Looking to Get a HELOC With Bad Credit?

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Hey there! If you’re a homeowner in Ontario with bad credit and you’re wondering how to tap into your home’s equity with a Home Equity Line of Credit (HELOC), you’re not alone. The process can feel overwhelming, especially when you have a bad credit score. But don’t worry—we're going to walk you through everything you need to know.

We’ll cover what kind of credit score you need, how your credit affects approval, whether a co-signer can help, using a HELOC for debt consolidation, options with different banks, the easiest way to get one, how to apply, and what interest rates look like. Let’s dive in!

What’s a HELOC Anyway?

First off, a HELOC is like a reusable credit card tied to the value of your home. You borrow against the equity—the part of your house you actually own after subtracting your mortgage—and you can use the money whenever you need it, up to a limit. You only pay interest on what you borrow, and as you pay it back, that credit becomes available again. It’s flexible, which is why people love it. But bad credit? That can make things trickier. Let’s break it down.

Credit Score Needed to Get Approved for a HELOC

Well, there’s no one-size-fits-all answer, but most banks in Ontario like to see a score of at least 680 to feel comfortable giving you a HELOC. That’s considered “good” credit. If your score is below that—say, in the 500s or low 600s—you’re in “bad credit” territory, and traditional banks might say no. They see a lower score as a sign you’ve had trouble managing debt before, and they get nervous.

Some lenders, especially “B lenders” (we’ll talk more about them later), will work with scores as low as 550 or even less. They’re more flexible because they focus on your home equity and other factors, not just your credit score. Still, the lower your score, the harder it gets, and the terms might not be as sweet.

How Does Your Credit Affect Your HELOC Approval?

Your credit score doesn’t just decide if you get a HELOC—it also affects your pricing. If your credit’s bad, lenders see you as a bigger risk. and they might charge you a slightly higher interest rate. For example, someone with great credit might get a HELOC at 8% or 9%, while you could be looking at 10% or more.

Your credit limit could be reduced as well. With good credit, you might borrow up to 80% of your home’s value (minus your mortgage). With bad credit, lenders might cap you at 65% or 70%, or even lower if your score’s really low. They’re playing it safe, making sure you’ve got enough equity to protect them if you can’t pay. So yeah, bad credit doesn’t always stop you from getting a HELOC, but it can make it more challenging and limit how much you can borrow.

Will a Co-Signer Help Get Your HELOC Approved?

What if you’ve got a friend or family member with solid credit and good income? Yup, a co-signer can make a difference if you're trying to get a HELOC with low income or credit. If they’ve got a good credit score and stable income, they can sign onto the HELOC with you. That tells the lender, “Hey, if this person can’t pay, the co-signer’s got our back.” It lowers the risk, so you’re more likely to get approved, and maybe even snag a better rate or higher limit.

But here’s the catch: your co-signer’s on the hook too. If you miss payments, it impacts their credit, and the lender can go after them for the money. It’s a big ask, so make sure you’re both clear on the responsibility before going this route.

Can You Use a HELOC for Debt Consolidation?

Now, let’s talk about one of the best things a HELOC can do: debt consolidation. If you’ve got high-interest debt—like credit cards at 19% or personal loans—a HELOC can roll them into one lower-rate payment. Yes, even with bad credit, this is possible, and it’s a game-changer.

Why?

Because HELOC rates, even with bad credit, are usually way lower than credit card rates. Say you owe $20,000 across a few cards at 19%. That’s about $3,800 in interest a year. Switch that to a HELOC at 10%, and your interest drops to $2,000—just about half!

With most of our clients, they cut their interest costs by up to 50% this way. Plus, your monthly payment shrinks since you’re spreading it out over time with a lower rate. It’s not a magic fix—you still owe the money—but it makes it way easier to manage.

Can You Get a HELOC from a Different Bank?

Here’s where it gets interesting. If your mortgage is with a big bank like RBC or TD, they usually want your HELOC to stay with them too. They’ll often say, “We’ll only add a HELOC if your first mortgage is here.” That’s fine if your credit’s good, but if it’s bad, they might flat-out refuse.

The workaround?

Some B lenders—smaller, more flexible companies—offer “stand-alone” HELOCs. That means your first mortgage can stay with one bank, and your HELOC can come from somewhere else. These lenders don’t care as much about your credit score and focus more on your home equity. It’s a great option if your main bank won’t play ball, but the trade-off is higher rates since the HELOC sits in “second position” behind your mortgage.

Easiest Bank to Get a HELOC with Bad Credit

So, which bank’s the easiest to get a HELOC from when your credit’s bad? Honestly, there’s no simple answer.

It depends on a number of factors: where your property is, how much equity you’ve got, and your debt-to-income ratio (how much you owe compared to what you earn). A rural home in Thunder Bay might get different offers than a condo in Toronto. And if you’ve got tons of equity but a low income, some lenders might still say no.

Your best bet is to work with a reputable mortgage broker. They know the ins and outs of the market and can match you with lenders—often B lenders—who are cool with bad credit. Trying to figure it out solo is like guessing in the dark. A broker’s got the flashlight.

How to Apply for a HELOC with Bad Credit

Alright, how do you actually get this thing? Again, a reputable mortgage broker is going to make a big difference here—they’ll handle the heavy lifting. But if you’re curious about what they do, here’s the step-by-step:

Check Your Equity: They’ll figure out your home’s value (with an appraisal) and subtract what you owe on your mortgage. That’s your equity—the key to how much you can borrow.

Gather Your Documents: You’ll need proof of income (pay stubs, tax returns), your credit report, mortgage statements, and ID. If you’re self-employed, they might ask for extra paperwork.

Shop Around: The broker pitches your case to lenders who don’t mind bad credit—usually B lenders or private ones.

Get an Offer: If a lender makes an offer, they’ll send an offer with your limit, rate, and terms. You review it with your broker.

Sign and Close: Once you agree, there’s some legal stuff (like registering the HELOC against your home), and then you’re set.

Interest Rates for Bad Credit HELOCs in Ontario

Now, let’s talk pricing. As of April 2025, HELOC rates for bad credit in Ontario vary.

If you’re going with a B lender and your HELOC is in second position (behind your first mortgage), rates start around 7.49%. That’s higher than the 4-5% prime rates big banks offer to folks with good credit, but it’s still decent compared to credit cards.

Rates increase if your loan-to-value (LTV) ratio is high—say, you’re borrowing 80% of your equity instead of 65%—or if your credit score’s really low. You could see 8%, 9%, or more. It’s all about risk: the more they’re lending against your home, or the worse your credit, the more they charge. Still, it’s much cheaper than other bad-credit options like personal loans.

Get a HELOC with Bad Credit in Ontario

If your credit isn’t great, you can work on improving it over time—pay your bills on schedule and reduce your debts where possible. Having more equity in your home can also make a difference; if you’re able to pay down some of your mortgage, lenders will feel more confident about approving you. And if B lenders aren’t an option, don’t overlook private lenders. They tend to have higher pricing, but they’re often more willing to work with people in tough credit situations.

Getting a HELOC with bad credit in Ontario isn’t always easy, but it’s definitely possible. You have choices—like adding a co-signer, using it for debt consolidation, or exploring stand-alone HELOCs—and a mortgage broker can guide you to the right lender for your needs. It’s about finding a solution that matches your circumstances rather than trying to force something that doesn’t fit. If you have more questions, feel free to ask—I’m happy to assist!