Bridging Loans with Bad Credit
Getting a bridging loan with bad credit is difficult but not impossible. An adverse credit score may be limiting, but it does not mean you cannot be trusted with a loan today.
Your financial situation may have changed dramatically since you received a poor credit rating. Plus, your current situation may convince lenders that you are now more responsible with your finances.
You can get a bridging loan from most high street banks (Halifax offers bridging loans, as does Nationwide, Barclays, and HSBC) and from bridging finance and development lenders.
While some high street banks may take your adverse credit into account, most bridging loan providers care more about your exit strategy and assets.
This article will look at how to get a bridging loan with bad credit. We can get you approved for a bridging loan with bad credit within 24 hours, start online below:
Can you get a bridging loan with bad credit?
If you have bad credit, you can still attain a loan. On the whole, a bridge loan is considered more flexible than any other type of loan. For this reason, they are often taken out by individuals with a poor credit history.
Bridging loans are a type of secured loan used mainly by property owners who need funds quickly.
This money is often used to bridge the gap between buying and selling a home. These loans can also be used for alternative purposes, such as covering the cost of home renovations to increase property value. In the latter case, the money gained from eventually selling the home is generally returned to the bank to repay the loan.
This loan type is available from most high-street banks. They are strictly given out on a short-term basis and usually are only provided for 12 months. In many cases, every month, the borrower will make interest payments back to the bank.
The fact these loans are short-term is part of the reason why banks can provide them to people with a bad credit history. Most bridge loans are provided as ‘closed’ bridging loans.
A closed loan is when a payment plan is already mapped out and agreed upon. Although it is possible to gain an open bridging loan, it may be challenging to find one if you have a bad credit history.
All bridging loans require a credit check
Although a bad credit history doesn’t necessarily exclude you from bridge loans, the provider will always perform a credit check before approving the loan.
This is to determine the extent of your adverse credit, from which they can decide how much to lend you and draw up the terms of the loan.
There are certain financial red flags that impact the likelihood of you receiving a bad credit bridge loan. If your credit history features any of the following, your options for bad credit bridging loans may be limited:
- County court judgment (CCJ)
- Debt management plan
- A repossessed home
However, a strong exit strategy and a collateral agreement could overwrite any of the above. Plus, if any of these are dated long ago, they will not affect your access to bridging finance as much as a recent CCJ, for example.
Bridging loans require credit checks so lenders can review your financial history cohesively rather than merely focusing on one aspect.
All aspects of your credit check determine how likely you are to receive bad credit bridging finance.
Two things that specialist lenders may not consider are if you have no credit history or missed a mortgage payment in the past (this does not apply if you’ve made several late payments on your mortgage).
While these two examples would impact other loan types, they’re generally overlooked by lenders.Get started online
What you need to get a bridging loan with bad credit
Bridging loans are more flexible than mortgages. While a bad credit mortgage will likely involve extremely high-interest rates and a large deposit, it’s possible to get a bad credit bridging loan with responsible interest rates and deposits.
The two main things that count in a bridging loan are your exit strategy and your assets.
An exit strategy
The exit strategy is how you plan on repaying the loan. A lender needs to know that they can entrust you to repay the loan within the set timeframe. The more definite and clear your exit strategy, the more likely you will attain a bridging loan.
The most common exit strategy is to repay the loan using the money earned from selling your property. Another plan would be to remortgage your home with an agreement in principle (AIP) in place.
If you’ve taken out a bridging loan to cover the renovation cost to increase your home’s market value, your exit strategy could be the money you gain from selling the property.
Alternatively, if you are a property developer, you’ll need a solid business plan to present to the lender in place of a standard exit strategy.
Other popular bridging loan exit strategies include:
- Selling off valuable assets other than your home or properties.
- Selling one or several of your other properties.
- Inheritance that you are scheduled to receive at a specific time.
Bridging lenders will consider all applications on a case-by-case basis. Your exit strategy’s strength depends on how quickly and easily you can attain money and the value of your collateral.
If you have a strong plan in place, a lender will likely overlook your poor credit rating in favour of providing you with the loan.
Bridging loans are typically smaller than mortgages and prove less financially risky to the investor. For this reason, exit strategies are seen as more important than bad credit.Get started online
As with all loan types, the assets you secure your loan against can increase the chances of your loan application getting approved.
Collateral works the same for bridging finance as for any loan – the more security you can provide (both in terms of quantity and overall value of your collateral), the more likely bridging loan lenders will grant you a bridging loan.
As standard, the property you’re taking out the loan for is used as your primary loan security. However, it’s encouraged that you put forward more than this. Your security offering can include additional properties and any other item you own with a value equal to what you’ll owe. What counts as acceptable security depends on the bridge loan provider.
Instead of putting down additional security, you may be able to increase your deposit.
Other things you’ll need for bad credit bridging finance
Besides an exit strategy and assets, you’ll also need the following to get a bridging loan with adverse credit:
- A deposit – The standard deposit size for both personal and commercial bridging loans is 25%. If you’ve got a particularly adverse credit situation, you may need to pay more (or if you cannot provide additional security).
- A solid property – The property’s condition will impact the bridge loan. Even if you plan on renovating once you attain the bridge loan, the property needs to be in good and saleable condition.
- Property development experience – If you are taking out a bridge loan for property development purposes, experience in the field would be preferred.
How to get a bridging loan with bad credit
To increase your chances of receiving a bad credit bridging loan, carry out the following steps:
Run credit checks on yourself
Understanding the reasons for your bad credit score is important in attaining a loan.
While you may know that you have a poor credit rating, the reasons behind your score may not have been clarified.
Knowing why you have a bad credit score, you’ll be able to highlight how you won’t make the same financial mistakes again.
This way, you can build an argument unique to your case, which proves to lenders that you’ve acknowledged your past mistakes and are prepared to learn from them.
While checking your credit report, you may identify parts that need to be corrected. Erroneous parts of your score can be rectified, which will increase your chances of receiving a bad credit bridging loan.Get started online
Organise your documents
The foundation of a quality exit strategy is organisation.
You need to arrange your proof of income, proof of address, bank statements, personal income information, and proof of ID in an understandable order.
Make sure all documents are up-to-date and reflect your current financial situation, showing how you’ve been improving your financial record.
Get your property on the market
A lender is far more likely to grant you a bridging loan if your property is already on the market.
A common exit strategy is to agree to repay the lender using the money earned from selling your property. In this instance, your property is likely used as security for the loan.
With your property already on the market, the lender can see that you’re making an effort to sell it as soon as possible. The home is far more likely to sell sooner rather than later, which ensures that the bridging loan will be returned promptly.
To further increase your chances of attaining a loan, present the lender with a detailed plan for the sale of the property. This plan could also suggest an estimated timeframe for the sale.
Here at Loan Corp, we’re ready to help you attain a suitable loan from a trusted lender. Use our contact form to start arranging your bridging finance today.Get started online
Can a bridging loan help my bad credit?
A bridging loan could improve your credit rating.
Your credit score may improve if you successfully take out a bridging loan and return the funds on time.
Bridge loans can be seen as a way to prove to banks that you can be responsible with money. Being able to return a considerable sum of money within a designated timeframe could prove to banks that you have improved as a lender since you received a poor credit score.
Successfully returning a loan will increase the chances of you receiving another loan from the same lender in future. It may also help you get a loan from a different lender, and could potentially make a case for you when applying for a mortgage.
Can a bridging loan harm my credit history?
On the other hand, if you fail to repay your loan on time, it’ll likely worsen your credit score – especially if you already had a poor credit score, to begin with.
Bridging finance, bankruptcy, and repossession
If you have a low credit score but are facing bankruptcy or repossession, you could take out a bridge loan to help. If there is enough equity in your residential property, it can still be used as security in a bridge loan to help you avoid bankruptcy.
Similarly, bridging finance can also help you out when faced with repossession. Although repossession normally means that you’ve missed a payment on your mortgage, as long as you can produce a solid exit plan, you may be able to find a lender to provide you with a bridge loan.
Is it possible to get a bridging loan without a credit check?
Although getting a non-status bridging loan is possible, we wouldn’t recommend it. Not only are the interest rates much higher for these loan types, but first-time lenders are unlikely to be approved for them.
Are there any bridging loan alternatives?
The closest thing to a bridging loan would be to arrange for a fast house-buying company to release equity from your property. Fast house-buying companies buy your house from you, while bridging loans allow you to retain the asset. For this reason, we’d recommend bridging loans over fast house-buying companies.
If you have credit issues and need a loan to cover you between moving, then bridging finance can help you out.
Compared to other loan types, you are far likelier to meet the lending criteria of bridging finance providers.
To attain a short-term loan from a bridge finance provider, you’ll mainly need an exit plan as well as arranged assets.
If you’re not sure where to go for a bridging loan, Loan Corp is ready to review your enquiry and match you with the best-fitting loan provider available.Get started online