Bad Credit Bridging Loans

The fact is for people with financial problems and a poor credit history who own a property, a bridging loan is very often the last resort and the only way to get out of their short-term financial difficulties. Irrespective of your credit rating it allows them to access cash tied up in their property with very few questions asked.

A traditional lender would not even consider lending in these situations, even with just one missed payment on your account it can be near on impossible to get funding secured against a property. However with a bad credit bridging loan as long as the property loan to value is ok and the amount required fits into the lender’s criteria then a bad credit bridging loan is usually available to the applicant although interest rates will be significantly more than if you had good credit.

If the applicant has CCJ arrears outstanding it is likely that a lender will insist that these are cleared from the loan advance and would need an undertaking from the borrower that any outstanding amounts to creditors are cleared

This would then allow the borrower breathing space to sort out their other finances and start rebuilding their credit file.

You have to also take into account that the interest on the loan will be deducted from the loan advanced, so there is no need to cover monthly interest costs for the duration of the loan on a monthly basis, it is all dealt with when the loan is paid back.

Obviously, the fact that the applicant has bad credit will exclude them from the best rates and there are some specialist lenders work in the sector of the market who still offer competitive rates.

One thing to bear in mind is that all lenders will want a clear exit strategy for when the Bridging Loan is paid back, most borrowers with bad credit will be excluded from most mortgage products, apart from a few lenders who charge accordingly.

So you would need to clearly explain what your exit strategy is either the sale of the property that the loan is secured against or any other funds that you have coming in during the loan period, you will also need to provide proof that the funds are likely to come in.

These loans are for up to twelve months and can be taken out for as little as one month, although it is advisable to take the loan out for as long as you can to allow you time to sort your financial situation out. In very rare cases a bridging loan can be taken out for 18 months although very few lenders offer this facility.

One option is to extend the Bridging loan after 12 months with a 6-month extension, lenders will look at this option if it still looks viable, however, you should be aware that you will also be asked to pay another arrangement fee to extend the loan. After the extension period, the lender would never offer another one so you would have to either refinance with another bridging loan lender or go for a fire sale to pay the lender back.

Note if you go over the agreed time lenders would put you on a default rate of interest this is usually far more than the initial rate agreed on your loan. Note not all loans are authorised and regulated by the Financial Conduct Authority.