Applying for A Bridging Loan With Bad Credit

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Home » Bridging Loans » Types of Bridging Loan » Applying For A Bridging Loan With Bad Credit


What is a bad credit bridging loan?

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.

These loans are usually taken out for a maximum of 18 months. They are limited to 12 months for bridging loans secured against your own home as they become regulated by the FCA.

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.

How can a bridging loan benefit me?

They tend to be used in situations where other types of finance wouldn’t be possible. The main consideration for potential borrowers is your exit strategy – your plan for how you’ll repay the loan.

As the interest is usually added to the loan, meaning there are no monthly payments to make, you may be able to borrow funds in the short-term that otherwise wouldn’t be affordable.

For example, if you’ll be repaying the loan through the sale of the property, your income and credit history don’t impact your ability to repay the loan.

As such, the likelihood of selling the property for the expected price during the term of the loan is far more important during the application process than your income or credit history. This will be reflected in the documents and information that the lender requests during the application process.

Can I get a bridging loan with bad credit?

Yes, previous credit problems are less of a problem when taking out a bridging loan than with other types of borrowing. This is because the interest rates, arrangement fees and other costs are often rolled into the loan terms, meaning the lender is not reliant on you to make monthly repayments.

We’ve arranged lots of bridging loans for people who are looking to avoid repossession, those who have already been repossessed and even those who have previously been made bankrupt.

As long as your chosen exit strategy is realistic and can be backed up when the lender checks, we should be able to arrange a loan for you.

What checks will the bridging finance lender carry out?

The lender will still do credit searches on you as part of the process, although they may choose to ignore negatives on there. This allows them to check for other issues such as fraud markers on file which, if present, will be frowned upon and make lending much less likely.

The main checks that the lender will focus on are, as stated above, are around evidence of being able to meet repayments (where interest isn’t added to the loan) and the exit strategy of the bridging loan. Where you are planning to sell the property, the lender will look at the sale prices of other properties in the area, along with the average time taken to sell a property locally.

Where refinancing the property is your preferred exit route, the lender will focus on ensuring that your refinance is realistic. They will do this by requesting a copy of your agreement in principle (AIP), and often by requesting proof of other documents such as proof of income to ensure that you can repay and that your AIP is realistic.

Whichever exit route you decide to take, the valuation will be a key factor to your finance application, should the lender require one. If you need more information on what checks are needed and the funding options available – our team of specialist brokers is on-hand.

Will I end up paying more for bridging finance because of bad credit?

The options available to you when looking for a bridging loan maybe slightly restricted depending on the level of adverse credit you have. That said, the difference in the product you end up with may not be as big as expected and in some cases, bad credit may not increase the cost of your bridging finance at all.

The rate you will pay depends on several factors. Depending on your circumstances, your credit history may be ignored.

What types of credit problems will bridging loan lenders consider?

Bridging finance lenders are generally very flexible and take a common-sense approach to lending. As such, they will consider most circumstances, including:

  • Defaults
  • CCJs
  • Mortgage arrears
  • Bankruptcy
  • IVAs
  • Debt management plans
  • History of payday loans

Bridging finance for people with CCJs and defaults

As mentioned above, CCJs and defaults won’t necessarily increase the cost of your bridging loan. We can still arrange bridging finance for those with CCJs and defaults up to 75% loan to value (LTV).

Some lenders will view CCJs and defaults more favourably if they have been satisfied either prior to, or as part of the application.

Can bridge loans be used to stop bankruptcy proceedings?

Yes, if there is sufficient equity in your property to raise funds through a bridging loan, then some lenders will allow you to borrow to stop bankruptcy proceedings.

This is a specialist area and it would be better to discuss your specific circumstances with an expert rather than taking general advice online.

Can I use bridging finance to avoid repossession?

Yes, there are a number of lenders who will lend to avoid repossession. Usually, when your current lender is seeking repossession, payments have been missed on the current mortgage, so the exit will be especially important here.

Again, this is a very specialist area and it would be wise to take specific advice on the options available to you.

Second charge bridging loans with bad credit

Second charge bridging finance can be arranged for people with adverse credit, subject to a suitable exit being in place.

One main consideration is that in most cases, the first charge lenders consent to a second charge is required. Where there are current, or even recent arrears, they may be unwilling to approve this.

In these cases, we can arrange a loan using an equitable charge, but this may result in a slightly higher interest rate.

Commercial bridging loans with bad credit

Bridging loans secured against commercial properties can be offered on both an owner occupied, or commercial investment basis.

As long as the exit strategy is strong, funding should be available.


About The Author

This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.

Gary Hemming CeMAP CeFA CeRGI CSP  -  
Commercial Lending Director

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