A second mortgage loan after a bankruptcy is a valid choice for some people. With your home as your collateral, a home equity loan can get you better rates than with other types of loans. However, consider all your options before committing to a loan payment.

How Long Ago Did You File Bankruptcy?

Right after your bankruptcy has been discharged, you can get a second mortgage. But your rates will be 12% or higher with subprime lenders. The longer you wait before taking on large loans, the better your rates will be. Two years is usually the minimum to get back to a good credit score. Thats not to say you cant get reasonable rates sooner.

If you need a small amount of credit, consider opening a credit card account. Not only will it be cheaper since you wont have application fees, but it will help improve your credit score. Regular credit card payments reestablish your payment history.

How Expensive is a 2nd Mortgage Loan?

A second mortgage usually requires closing costs slightly less than a mortgage. However, there are lenders who will waive part or all of those fees. Some may charge higher rates for this, so compare with other lenders.

You can also open a line of credit with your homes equity. That way you use only the cash you need. You can pay off the balance monthly or over a couple of years. In addition, fees are usually less with this type of credit.

Even though closing costs should be considered with a second mortgage, know that you can get a tax advantage. You can write off interest paid and some fees. That isnt an option with credit cards or personal loans.

Is a Bad Credit 2nd Mortgage the Best Option?

Take a look at your own budget and financial goals to determine if a second mortgage can help you. Do you need the cash now? Are you concerned about rates? Then a second mortgage should be considered.

Be sure to also research lenders. With a bankruptcy, lenders may try to take advantage of you. Request quotes to get an idea on appropriate rates and ask questions. The right loan is out there, you just have to search for it.