Bad Credit Bridging Loans Explained
A bridging loan for bad credit is a form of short-term finance secured by a property. The purpose of this type of loan is to bridge the financial gap between two events, like the acquisition of a new property and the sale of an existing one.
These loans are commonly employed in scenarios where obtaining other forms of finance might prove challenging due to existing or previous bad credit. The primary consideration for prospective borrowers revolves around their exit strategy – a detailed and considered exit strategy will play a big part in your loan application being approved.
Given that interest is typically accrued and added to the loan, eliminating the need for monthly payments, individuals may access short-term funds that would otherwise be financially unattainable.
For instance, if the repayment strategy involves selling the property, factors such as income and credit history have minimal impact on the ability to settle the loan. The main focus of the lender will be on whether you are likely to sell the property at the anticipated price within the loan period as opposed to your credit history or income. This will be highlighted in the documentation and information requested by the lender throughout the application process.
If you think a bad credit bridging loan would be a suitable option for you, then contact the team here at Pyxis today. As a professional broker with many years’ experience we have access to an extensive panel of lenders and as such will be able to help you get the bridging loan best suited to your specific needs.
Bridging Loan Calculator
Try our bridging loan calculator here. Simply fill out the information and click “Continue”.
There are only three steps involved in the process and it should only take around five minutes to complete!
We’ll do the rest and contact you back with a bridging loan quote as soon as possible.
Bad Credit Bridging Loan Key Features
The key features of bad credit bridging loans are similar to those of a standard bridging loan and generally include:
• Maximum loan to value of 75%
• Interest Rates starting from around 0.70% per month.
• Available as 1st and 2nd charges
• Terms of between 1-18 months with a maximum of 12 months for regulated loans
• Your application can usually be completed within 5 days – 3 weeks.
Residential and commercial property along with land is usually accepted as collateral. Bad credit bridging loans are available to individuals, businesses, and limited companies. To be considered for a bridging loan you must be a minimum of 18 years of age.
Bad credit bridging finance criteria
Certainly, past credit issues pose less of a hindrance when obtaining a bridging loan compared to other forms of borrowing. One of the main reasons for this is that interest rates, arrangement fees, and other expenses are rolled into loan terms, alleviating the necessity for monthly repayments from the borrower.
Bad credit bridging loans are available for individuals aiming to prevent repossession, those who have already undergone repossession, and even individuals with a prior bankruptcy record. The pivotal factor in securing a loan lies in the viability of your chosen exit strategy, provided it is realistic and substantiated during the lender’s verification process.
What checks does the bridging finance lender conduct?
While the lender conducts credit searches as part of the process, they may choose to overlook negative aspects. This allows them to identify potential issues such as fraud markers, which could adversely affect the likelihood of lending.
Primary considerations for the lender encompass evidence of your ability to meet repayments (especially when interest isn’t rolled into the loan) and the viability of your chosen exit strategy. In cases where property sale is the exit plan, the lender assesses local property sale prices and the average time properties take to sell in the area.
For those opting for refinancing as the exit route, the lender ensures the feasibility by requesting an agreement in principle (AIP) and often requiring additional documents like proof of income to validate your repayment capability and the realism of your AIP.
Regardless of your chosen exit strategy, the valuation remains a pivotal factor in the finance application if mandated by the lender. If you require further details on necessary checks and available funding options, our team of specialist brokers is ready to assist.
What credit problems will Bridging Loan lenders consider?
Bridging finance lenders adopt a flexible and pragmatic approach to lending, considering a broad range of circumstances, including:
• Defaults
• County Court Judgments (CCJs)
• Mortgage arrears
• Bankruptcy
• Individual Voluntary Arrangements (IVAs)
• Debt management plans
• History of payday loans
How much Can I Borrow?
Loan Amounts
loans are usually available to individuals with unfavourable credit starting from around £50,000, and there is no upper limit on the loan amount.
Loan-to-Value Ratio
The maximum loan-to-value (LTV) is generally around 75%, although it may be possible to get a 100% loan amount if you can provide added security.
The offered LTV may fluctuate based on your financial circumstances and the exit strategy you choose.
Adverse Credit Bridging Loan Rates & Costs
For individuals with prior adverse credit, the minimum available interest rate is usually 0.70% per month, and rates typically range between 0.70% and 1.75%.
Lower rates are typically reserved for applications with lower loan-to-values, and those at 50% LTV and below generally secure the most favourable rates.
Yes, beyond the interest, there are other considerations in terms of setup costs when opting for bridging finance, such as Legal Fees – You are responsible for paying both your own and your lender’s legal expenses. You will be required to provide an undertaking and asked to pay the lenders legal fees to your solicitor at the start of the legal process. Sometimes lender legal fees can be added to the loan.
The range of options for securing a bridging loan may be somewhat limited based on the extent of your adverse credit. Nevertheless, the impact of credit issues on the overall cost of your bridging finance may not be as substantial as anticipated, and in some instances, bad credit might not escalate the cost at all.
As a well-established and reputable broker we have helped many customers with adverse credit ratings find the bridging finance that they need. For a friendly informal discussion or to talk about your particular circumstances contact our team without delay.
Bridge Loans For People With Bad Credit
Bridging Finance for Individuals with CCJs and Defaults
As we alluded to above, the presence of CCJs and defaults on your credit report does not necessarily mean your bridging loan will come with increased costs. As a broker the team here can help you arrange bridging finance even if you have CCJs and defaults, with up to 75% loan-to-value (LTV).
Certain lenders may take a more favourable view of CCJs and defaults, especially if they have been satisfied either before or as part of the application process.
Is Bridging Finance Applicable to Prevent Repossession?
Yes, there are numerous lenders willing to provide loans to prevent repossession. Typically, if your current lender is looking to repossess a property, and mortgage payments have been missed, the exit strategy becomes particularly crucial.
Once again, due to the intricate nature of this field, seeking specific advice on the available options is prudent.
Second Charge Bridging Loans for Individuals with Bad Credit
Bridging loans secured against commercial properties are available for both owner-occupied and commercial investment purposes. As long as a robust exit strategy is in place, funding should be accessible.
Our range of bridging loan solutions includes…
Why Use Pyxis Capital?
The Team at Pyxis Capital have extensive knowledge of bridging finance and take time to understand a client’s needs and requirements.
You will have a single point of contact from start to finish and will also be provided with direct contact details for one of our Company Directors.
Most importantly you won’t be left with the finding an Exit Strategy from your bridging finance facility. As this is something that will be researched on day one and if possible, agreed in principle with a long-term lender.
