Before you apply for a bad credit 2nd mortgage it’s wise to take the time to look into the pros and cons of getting a 2nd mortgage with bad credit. It’s certain that 2nd mortgages can be very useful in the right situation, but they are not always the best choice for everyone. You should understand that by getting a 2nd mortgage you are adding to your financial burdens and this may work in your favor, but it could also work against you.

What is a 2nd Mortgage?

A 2nd mortgage is quite simply a loan that uses the equity in your home as collateral. It can also be called a home equity loan. You can get your 2nd mortgage through any mortgage lender, either your existing mortgage holder or a new company. Once the 2nd mortgage is approved you then have two monthly mortgage payments, the original one against the home and this new 2nd mortgage against the equity in your home.

Why You Might Want to Apply for a Bad Credit 2nd Mortgage

There are several reasons why you might want to get a 2nd mortgage. Some people will get a bad credit 2nd mortgage for the sole purpose of increasing their credit score. This is a very solid strategy if it won’t put you into financial hardships. Plus, you can use the lump sum to pay off other debts and be debt free in a short period of time.

A lump sum like this can be extremely useful in paying off credit card debt, which can be difficult for even the most motivated. Credit cards have such unreasonably high rates and even with a bad credit 2nd mortgage your interest rate should be substantially lower. This will help to lower your monthly payments and the 2nd mortgage should be paid off within 3-7 years, which is often faster than most people can pay off credit card debt.

Using 2nd Mortgages to Improve Your Credit Score?

If you’re going to use the 2nd mortgage to boost your credit score you should know that the increase won’t be immediate. Instead you’ll see a gradual increase over time. Once you pay off the credit cards and other debts and regular payments are being made on the 2nd mortgage it’s possible to see monthly increases of 20 points on your credit score. These may slow down over time, but as long as you continue to make payments on time, keep your other balances low and avoid late payments you will continue to see your credit score rise for a long time.

I know that it will be tempting to close your credit card accounts once you get your bad credit 2nd mortgage and pay them off, but try to restrain yourself from doing this. Closing an older credit account can actually harm your credit score. So, if you feel you can’t keep from using the cards then cut them up, but leave the account open.

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