Can I Get a Bridging Loan With Bad Credit?

While having an adverse credit rating may prevent you from getting more traditional forms of finance such as a mortgage, this is not necessarily the case when it comes to a bridging loan. The main reason for this is that a bridging loan is usually secured against property and as long as you can demonstrate to the lender that you have a good exit strategy lenders may be willing to loan you the money you require. 

 

For the uninitiated an exit strategy is the means by which you intend to repay the loan. This is often the sale of the property the loan is secured against or receipt of funds from another source. In this blog post we are going to take a closer look at bad credit bridging loans and hopefully answer some of the questions routinely asked by people looking for short term finance who may have a less than perfect credit score. 

What is a bad Credit Bridging Loan 

Bad credit bridging loans are a type of short term finance designed to help anyone with a poor credit rating cover a funding shortfall. A good example of this may be when you want to buy a new property but are having trouble selling your existing one. 

 

Bridging loans can usually be arranged much quicker than traditional methods of finance and are secured against a property. This property acts as security for the loan and if you fail to repay the agreed amount the lender has the option of claiming the property in lieu of the money. 

How Do You Get a Bridging Loan with Bad Credit 

When it comes to bridging loan applications lenders consider each case on its own merits. All lenders are different and as such will have their own criteria when it comes to bridging loan applications. This means that not every lender is prepared to consider a borrower that has a poor credit history. 

 

Generally having a poor credit score will make obtaining credit both difficult and expensive. This is often the case with bridging loans as well as having a good credit score will not only help ensure you get the loan but will give you access to much lower rates of interest.  

 

However, getting a bridging loan with bad credit tends to be easier than getting say a mortgage or credit card. The main reason for this is that even though a lender will look at your credit score they may place more importance on other aspects when making a decision on the loan such as: 

The security You Can Offer 

The more security you can provide for the lender the better your chances of being approved for a bridging loan with bad credit will be. So it may be worth considering if there is anything else you could offer along with the property you are providing as collateral. This could be say a bigger deposit or other assets of value. Different lenders may accept various types of collateral, but keep in mind that anything you offer is at risk if you fail to repay your loan.

Your Exit Strategy 

As we mentioned earlier the exit strategy is the method by which you intend to pay the loan. Having a strong exit strategy means that a lender will see less risk in approving the loan and will give you a much better chance of success. 

 

The sale of the property the loan is secured against is the most straightforward exit strategy and one that is looked most favourably upon by lenders especially if you can demonstrate a plan and timeframe for any sale. 

 

Re-mortgaging is another popular exit strategy for bridging loans however an adverse credit score will make securing this type of finance difficult. A bridging loan lender will usually ask for an agreement in principle for a mortgage before considering this as an exit strategy. 

 

Other types of exit strategy could be, selling an alternative property to the one the loan is secured against, the sale of other investments you might have, or an inheritance that you can prove will be coming in the near future. 

 

Whether a bridging loan lender views these or other strategies as viable will depend on the specific circumstances, including the reliability of their value and how quickly the funds can be accessed. Lenders are likely to view having multiple exit strategies favourably.

What Different Types of Bad Credit are Lenders Prepared to Consider 

Although every application is considered individually and lenders have different criteria for bridging loans certain things will make approval more difficult. Having county court judgments against you, being declared bankrupt, having a house repossessed or being enrolled in a debt management plan could limit your options. However, that doesn’t mean there are no lenders out there prepared to offer you finance. 

 

If these problems occurred some time ago and if you can demonstrate you have a strong and viable exit strategy lenders may still be prepared to approve your application. If the reason for your bad credit is something relatively minor like one or two missed payments or you have no credit history but can still prove you have good security and a suitable exit strategy lenders may still view your application favourably. 

 

Finding an experienced broker can be crucial in these situations, as they often know which lenders are more likely to approve your application. However, you can also choose to search the market on your own. At Pyxis we have access to an extensive panel of lenders and our team have helped many clients gain the bad credit bridging loan they were looking for over the years. 

 

Will bridging Loan lenders Carry Out a credit Check 

Yes, as part of the application process bridging loan lenders will carry out a credit check. But they will also look at all other aspects of your loan such as the type of security you are offering and your exit strategy. These are key factors in any application and could well compensate for a poor credit history. 

Can businesses get commercial bridging loans with bad credit?

It is possible for a business with a poor credit rating to access a commercial bridging loan. The lender will take into account the reason for your bad credit score and as with personal bridging loans will look at the strength of your exit strategy and the security being provided when making a decision. As lending criteria differs just because one lender rejects your application it doesn’t necessarily mean others will. 

 

Hopefully this article has answered the majority of questions you may have had about bad credit bridging loans. However if you need more information or would like to speak to someone about your personal circumstances call the experienced team here at Pyxis today.