Can You Get A Bridging Loan With Bad Credit?

Everyone wants to own their dream home or to secure the land on which to build their dream property. But can you get a Bridging Loan with bad credit?

It can be practically impossible to get mainstream loan products such as a mortgage when you have a bad credit rating and poor credit history. That’s why many people turn to short-term specialist lenders for a solution.

Bridging finance is one of these short-term, specialist solutions. That’s because a poor credit rating is normally not a barrier to bridging finance in and of itself.

That’s right, you can get a bridging loan with bad credit!

Why you can get a bridging loan with bad credit

One reason that bridging lenders are more flexible about accepting people with poor credit is that bridging loans are taken out for a short length of time. Typically, the loans themselves rarely last longer than 12 months. So, whereas a mortgage lender has to make sure that you can pay the payments for 30 years, a development finance lender only has to make sure you can pay for a year or so.

Another reason that bad credit histories do not affect your chances of securing a loan as much as other forms of financing such as a mortgage is that bridging finance is secured against a property. A bridging lender will be much more concerned about the value and condition of the property than about your income, your credit history and your ability to pay.

Bridging loans are offered at a percentage of the secured property’s value—usually around 75% of the property’s value. That means that the lender knows that even if you don’t pay, they can recoup their losses and more by selling the secured property.

But that doesn’t mean that just having a property which you can secure your loan against is enough. Most lenders will require a suitable exit plan. This must be considered achievable by the lender. If you can’t show how you plan to repay the loan, such as by selling the property or securing a long-term financial solution, bridging lenders may be unwilling to lend to you.

Applying for a bridging loan with poor credit can take longer

Bridging loans are fast to secure in most cases. When you apply for a bridging loan you can expect to receive an answer in less than 24 hours. But that may not be the case when you have bad credit.

Bridging lenders have to carry out affordability checks like any other lender and these can take longer if you do not automatically pass them. That means you shouldn’t worry if you don’t hear back from a bridging lender for a few days. Your application will naturally take longer because of your circumstances.

Try to improve your credit score before you apply

Even though it is possible to secure bad credit bridging loans, applicants should always try to improve their credit score as much as possible before applying. There are no guarantees when it comes to bridge the gap finance and even a slightly better credit score can improve your chances of securing a loan.

Knowing how to improve your credit score isn’t always easy, however. We recommend applicants take the following steps:

• Pay off all credit cards or clear as much of the outstanding balance as possible
• Pay all future bills on time
• Do not take out or apply for any other forms of credit leading up to your application
• Use credit cards to show that you are able to take out and pay off credit every month
• Order your credit report, check for incorrect information and get issues fixed

In some cases, taking out a bridging loan and paying it back in full can improve your credit score. This is because it demonstrates your ability to take out and pay back credit in full and on time.

Bridging loans are not an answer to all of your problems. If you have bad credit and are considering a bridging loan you should think carefully and make sure that you can commit to repaying the loan in full.

If you are ready to apply, complete the form below to get the best rates for bridging loans when you don’t have the best credit history.