A junior loan, also known as a second mortgage or subordinate loan, is a loan taken out after a primary mortgage. This means it’s “junior” in priority, so if a borrower defaults, the primary lender is paid first. Junior loans are often used for home improvements, debt consolidation, or other large expenses. They generally have higher interest rates since they carry more risk for the lender. Junior loans can be beneficial but need careful management due to their repayment priority and added cost.