It should be noted that a second mortgage loan with bad credit will cost more in interest fees and, perhaps, in other charges such as closing costs than a conventional mortgage would. Hefty penalties for late or missed payments may also be levied. This is the reality of having a poor payment history with other creditors. Defaulting on second mortgage loans with bad credit can result in the loss of a home, as is true with principal mortgages. The lien holder will repossess a home and sell it to make repayment. Those considering this financial step should carefully take into account all options before committing to the financial agreement. While second mortgages can offer homeowners the opportunity to rebuild their credit by making timely payments, an additional financial obligations can also put the home at risk.