A bridging loan is a type of short-term finance used to bridge a gap in your finances. Bridging loans offer a solution when other types of finance are not available. In this guide, we look at whether you can get a bridging loan with bad credit, including the types of credit issues lenders will consider, and how to improve your chances of getting a bridging loan with bad credit.
Can I Get A Bridging Loan With Poor Credit?
It is possible to get a bridging loan with bad credit.
Generally, a good credit rating will give you the best chance of approval for a bridging loan. But whilst poor credit can make it difficult to get a loan, there are many lenders who are flexible, making it possible to be accepted for bridging finance with bad credit.
For most loans such as mortgages and credit cards, you are likely to be turned down if you have adverse credit. But this is not necessarily the case for bridging loans, as lenders take a more measured approach and look at the overall circumstances and requirements.
Why Are Bridging Lenders Flexible Towards Bad Credit?
For most types of traditional finance, credit score is essential to being accepted. For example, mortgages are repaid over a long term so the lender needs to feel confident that the monthly repayments will be made by the borrower for the whole period. Bad credit indicates a higher risk that repayments will not be met, preventing the borrower from being accepted.
On the other hand, bridging loans are repaid over a short term. Lenders are less concerned with poor credit because they do not depend on your ability to make long-term payments. Instead of credit rating, a bridging lender is more concerned with your security property and exit strategy.
What Type of Credit Issues Will Bridging Loan Lenders Consider?
Bridging loan lenders are flexible towards the following issues, and are willing to consider applications from people that have the following issues:
- no credit history
- low credit score
- late payments
- mortgage arrears
- CCJs (county court judgments)
- IVAs (individual voluntary arrangements)
- debt management plans (DMP)
- debt relief order (DRO)
- payday loans
Can I Get A Bridging Loan With No Credit Check?
Simply, no, you cannot get a bridging loan without a credit check, and lenders will always perform a credit evaluation to assess the risk of lending.
This evaluation is not a typical credit score that traditional lenders perform. Rather, it is an in-depth assessment of your credit profile and credit issues. As part of this check, lenders look for evidence that you will be able to repay the loan.
Bridging lenders will also base their decision on the severity of the issue. For example, a bankruptcy is worse than a missed payment. They will also look at how long the issue has been on file (the longer the better). They will take this credit evaluation into consideration when determining whether to lend and which interest rates to offer.
How To Improve Your Chances Of Getting A Bridging Loan With Bad Credit
Whilst clean credit is more attractive to lenders, when assessing your eligibility for bridging finance, lenders will look at a range of other lending criteria too. You’ll improve your chances of being accepted for a bridging loan with bad credit if you have the following:
- A Viable and Achievable Exit Strategy
How you plan to repay the loan is an important factor when considering your eligibility for a loan. Even if you have bad credit, you may still qualify for bridging finance if your exit strategy is realistic and achievable.
The greatest concern is whether any of your credit issues will affect the exit route and prevent the repayment of the loan. If your adverse credit compromises your exit strategy, you’ll find it more difficult to be accepted.
If you’re repaying the loan through the sale of a property, credit issues are less of a concern. However, if your exit strategy is to remortgage, bad credit increases your risk, so you may need to find a lender specialising in bad credit.
- Property with Sufficient Equity
A property with a good level of equity to secure the loan against may help you get a bridging loan with bad credit. Your loan can be secured against a property you want to buy or one you already own.
The bridging loan lender will assess how mortgageable or sellable the property will be. If you can demonstrate that there is a high amount of equity in your security property, this can offset the risks that bad credit poses to a lender, and you’ll stand a better chance of being accepted.
As long as the value of your security property covers the loan amount, then if the bridging loan is not repaid, the property can be sold to provide the repayment amount to the lender.
Contact Crystal Bridging Loans today. Our experienced advisers can provide expert advice on your options. We work with specialist lenders who are flexible towards credit issues, so even if you have bad credit, we’ll find the most suitable loan for your circumstances and the right lender for your situation.