Getting a Bridging Loan with Adverse Credit

How does an adverse credit history impact your eligibility for a bridging loan? Read on for independent advice about managing a poor credit score during a bridge finance application.

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Getting a Bridging Loan with Adverse Credit

Bridging finance might be a quick and easy way of raising borrowing, but as with any loan, having adverse credit can make the application process a little trickier.

As a UK bridge finance expert, the Revolution Brokers team has compiled this guide to steer you through all the ins and outs of bridge loans with bad credit.

To make an application or for professional advice about your bridge loan needs, give us a call on 0330 304 3040, or email at info@revolutionbrokers.co.uk.

Can I Get a Bridging Loan with a Bad Credit Rating?

You can, but it's vital to consult an independent broker before making an application.

Your exit strategy is the essential factor, and so you can find a short-term loan on an interest-only basis with most types of credit issues.

While some bridge lenders are reluctant to lend to applicants with an adverse credit history, there are plenty who will be happy to lend provided you can demonstrate a good exit strategy or offer a higher deposit to mitigate the risk factor.

Can I Apply for Bad Credit Bridging Loans in Any Circumstances?

Yes, bridging lenders can offer loans to applicants where any of the below apply:

  • Low credit score or no credit records.
  • Late payments or mortgage arrears.
  • Defaults and CCJs.
  • IVAs and DMPs.
  • Bankruptcy and repossessions.

The lender needs to know you will be able to pay back the loan at the end of the term, so will want to see evidence that your exit strategy is sound - such as an agreement in principle if you intend to remortgage.

Can a Specialist Bad Credit Broker Help Me Find a Bridging Loan?

Undoubtedly! The business finance broker team works with applicants of all types to negotiate competitive lending with niche providers experienced in bad credit loans.

Is a Credit Check Mandatory for Bad Credit Bridging Loans?

It is, yes. Lenders always need to run a credit check, although they are less likely to look at your credit score for this type of loan and more likely to look for serious credit issues.

If you have a clean credit record, you will get better interest rates, but it's still possible to secure a loan even with adverse credit history.

What are the Eligibility Criteria for a Bridge Loan?

Lenders will assess your application based on many factors other than your credit report, including:

  • The exit strategy.
  • What security you can offer.
  • How viable your business plan is.
  • Whether you have property development experience.
  • How much of a deposit you have available.

Is My Bridge Finance Exit Strategy More Important if I Have Bad Credit?

The lender will need to know how you will pay them back, which becomes more crucial if you have a bad credit history to contend with.

The more of a deposit, and the stronger the exit strategy, the greater the risk factor is mitigated, and the more competitive the rates you will be offered.

  • Only some lenders accept non-standard strategies. That includes repaying the debt through an inheritance, or an investment, for example.
  • The greater the security in your collateral property, the better. If the property is in a high-value area, and will easily repay the debt, this reduces the lender's risk.
  • A business plan is crucial if you are taking out a bridge loan for commercial purposes.
  • Your property development experience will be a factor in bridging finance to fund a development.
  • Most lenders look for a deposit of at least 30% to 35%. However, if you have bad credit, the higher the deposit you can offer, the better the rates and the more likely you are to have your application approved.

Can You Get a Bridging Loan With Bad Credit as a Second Charge?

Having your security as a second charge, and being a bad credit applicant make your application more complicated as both are significant risk factors.

Second charge bridge finance is a specialist product, and so to find a niche lender offering this loan, who is also able to accept low credit applicants is unusual.

In this scenario, your best option is to consult a whole-of-market broker who can assess the circumstances and provide independent advice about the best options available.

Could I Get a Bridge Loan as a Third Charge if I Have an Adverse Credit History?

As with second charge loans, getting a third charge bridge loan would be very difficult if you also have bad credit issues to contend with.

This would be a rare circumstance, but given the Revolution team a call on 0330 304 3040 and we'll work through the options with you.

Can You Get a Bridging Loan With Bad Credit for a Limited Company?

Many businesses have adverse credit, often due to commercial disputes or a history of late payments.

Bridging loan lenders won't necessarily reject a commercial company application, but will usually need additional security to mitigate a bad credit borrower's risk.

How Does the Property Type Impact My Bridging Loan Bad Credit History Application?

Lenders do not have any fixed restrictions in what a bridging loan can be used for, although they're more popular to finance fast property purchases.

There are no limits on what sort of property you can buy; although some lenders will have policies about the property types, they consider lower risk.

You can also use this type of loan to purchase a rental property investment, called a bridge to let loan.

Is a Non-Status Bridge Loan an Option if I Have Bad Credit?

It could be, but this is usually a last resort since the interest rates are high.

Non-status loans are bridging finances secured at higher interest rates against an asset.

Lenders consider the asset's value and your plans for the loan, but will not decide whether to offer to lend based on your personal income. Therefore, if you have valuable assets such as properties, but have an adverse credit history, this type of loan can be an alternative option.

Can I Get a Bridging Loan Bad Credit History Product if I Have Been Blacklisted?

The term blacklisted in reality doesn't mean much - one bank or lender might decide not to lend to you, but that doesn't apply to any institution apart from that specific lender.

You can have marks on your credit file if you have had issues with your credit, or problems such as CCJs, mortgage defaults or late payments.

However, lenders rely on their policies to decide what bad credit applicants they can accept. Being turned down by one lender does not mean that you won't be able to apply to another.

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Bridge loans are short-term and are faster to arrange than other financings. This flexible loan is usually easier to secure than a mortgage, but you will need to have a secure way to repay the debt, and the interest rates are higher.

Bridge loans can be used for almost any purpose, and are popular for purchasing properties when a fast sale is crucial. For example, buying a property at auction, or quickly completing a time-sensitive deal is often easier to achieve with a bridging loan.

The loan is interest-only, so you usually pay back a small amount related solely to the interest, and the full balance becomes payable at the end of the term. You need to show how you will repay that balance, for example, by selling the property or remortgaging.

Not really - commercial bridge finance can be for millions of pounds! A lot depends on how viable your exit strategy is, and if it can cover the value you wish to borrow, you have a good chance of approval. Some lenders set a minimum value, which can be anything from £10,000 to £50,000, so it's vital to apply to the right lender for the amount you wish to borrow.

Yes and no! Regulated bridging finance applies to residential properties you plan to live in. Commercial bridge loans or unregulated bridge loans are used for anything from business developments to buy to let investments.

A closed bridge loan has a finite end of term date, by which time the loan must be repaid, usually one year.

Lenders can offer bridge loans with several different interest calculation methods:

  • Monthly interest is paid off usually by direct debit. The balance then falls payable when the end of the term is reached.
  • Deferred interest means that the interest charge is rolled up into the loan total, and you'll need to pay the original balance plus the compound interest at the end.
  • Retained interest means that you borrow the relevant value that you owe in interest payments, and the amount payable is calculated depending on the length of the loan.

Most bridging loans run for around one year, although you can negotiate terms up to three years depending on what you wish to use the loan for.

Having bad credit can make it feel impossible to find competitive borrowing - which is where an independent, whole-of-market broker can make a substantial difference. Give the Revolution Brokers team a call on 0330 304 3040 or email us on info@revolutionbrokers.co.uk and we will recommend the best routes for your bridge finance application.

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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