Bridging Loans for Bad Credit: UK Options and Criteria

Why Equity and Exit Matter More Than Credit

Equity and your chosen exit strategy are the key to securing a bridging loan as a borrower with bad credit, rather than your credit history.

Short-term lenders focus on ensuring that they lend money and receive it back reliably and predictably, with little risk of default or financial loss.

As such, equity is a key as it is the key failsafe should the borrower fail to repay the loan. This equity ensures that the borrower is also risking money, and will avoid anything that could result in the risk of the repossession and forced sale of their property – meaning they are more likely to repay the loan.

Exit strategy, how the borrower plans to repay the loan ensures that a borrower has a realistic plan that is well understood by all parties. This is often either the sale of the security property, or refinance to a longer term form of finance, such as a mortgage.

Understanding the exit strategy allows the lender to check that this is realistic and likely to succeed.

Where the chosen exit strategy is sale of the property, the lender can simply check that the proposed sale price is realistic, how long similar properties take to sell in the local area and the cross-reference this against the loan term to ensure there is enough time to enact the plan.

For refinance based exits, the lender will ensure you have options available and qualify. This can easily be done by securing a decision in principle from a potential new lender.

Non-Status Bridging Finance Explained

A bad credit bridging loan is a short-term loan, which is secured against a property. These loans are designed to bridge a gap between two events, such as the purchase of a new property and the sale of your current home.

They can be taken out for 1-36 months, although most are for 1-18.

When secured against your own home, the loans are regulated by the FCA. These loans are known as regulated bridging loans.

In almost all cases, where a loan is repaid before the end of its term, you only pay interest for the period that the money is borrowed.