Bad Credit Second Mortgage
It can happen to even the best people. We all have times when the bills pile up faster than we can pay them off. Divorce, health problems or losing a job can mean getting behind in payments. Creditors are not very forgiving and they have long memories. Years after you’ve caught up with payments, your credit rating will reflect the damage done.
Just because you have a bad credit rating doesn’t mean that you can’t take a second mortgage. It just means that the rate will be higher. A bad credit rating means that your loan is riskier. The banks or lending institutions will make up for that risk by raising the interest rates.
But, your bad credit rating doesn’t have to make you the target of lenders who will take advantage of the situation. Some lenders will charge very high origination fees, excess points or unnecessarily high rates. Even if your credit rating isn’t sterling, it pays to shop around for a second mortgage.
Before you sign any loan agreement take the time to understand the terms completely. What happens if you decide to pay the loan off early? Are there fees that won’t show up until you are ready to close?
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If a lender is ready to give you a loan without looking at your credit history, that should send up a red flag. Reputable lenders need to know how much they are risking before they will give you a quote. If the agent tells you that they don’t need a credit check and then gives you a low rate, be wary. Sometimes you’ll get one story when you talk to the agent and another story completely when it comes time to sign the loan.
Second mortgages can make sense even when your credit is bad. A second mortgage can be a way to consolidate payments at a lower interest rate. But before you take out a second mortgage, make sure you understand why you got into debt in the first place. Paying off short-term unsecured credit card debt by taking out a long-term secured loan doesn’t make sense if you haven’t address the problem that caused the debt.
A reputable financial advisor can help you weigh different alternatives when you consider taking out a second mortgage. Understanding all your options can make the difference between a loan you can live with and one you’ll regret for many years to come.
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