Bridging Loan– a Suitable Option For Bad Credit Borrowers

A bridging loan is a funding solution that provides an opportunity to bridge financial gaps when you are trying to buy and sell a property simultaneously. But you may be thinking, can you get such loans when you have bad credit? Most banks and mainstream lenders do not allow you to take out a loan with an adverse credit score. But getting a bridging loan with bad credit is typically easier than other types of finance. For example, you may need better credit to get a mortgage, but bridging finance can be a suitable alternative for you.

You can apply for a loan through a bridging lender or p2p lending platform. With the increase in demand, the number of bridging lenders is also increasing, so you must shop around to find the right lender. Of course, with a bad credit rating, you do not have the best chances of approval, but it is still possible.  

Keep on reading to know everything about bad credit bridging loans. 

What Is A Bad Credit Bridging Loan? 

A bad credit bridging loan is a short-term loan designed to help individuals or businesses with bad credit fulfil financial obligations. These loans are secured against property and can be used for a number of purposes. Bridging finance is known for its speed of arrangement which means you can get quick access to funds compared to traditional mortgages. However, if you fail to repay the loan amount, your lender can repossess your property.   

 

You may have a below-average credit rating because you have experienced past credit problems or have not paid loan repayments on time. The only thing in which you face difficulty is that it will be harder for you to get approval. You may also be charged a bit higher depending on your financial circumstances.   

Getting Bridging Finance With Bad Credit

Bridging lenders assess applications on a case-by-case basis and have their own individual merits. Each lender has its own set of lending criteria, and not all lenders consider borrowers with poor credit. 

 

As a rule, having a below-average credit score makes it difficult to get approval and expensive to secure credit. The same is true for bad credit bridging financing. In contrast, you may find it much easier to secure a bridging loan with a lower interest rate when you have good credit. 

 

That said, you will find that lenders are more likely to approve a bridging loan with bad credit than if you applied for a credit card or mortgage instead. 

 

It is because bridging loan providers consider other aspects of your applications more important when making a lending decision. Typically these factors include the following: 

Your Exit Strategy

An exit strategy is your plan on how you will repay the loan. The stronger your exit strategy you have, the better your chances for approval. 

 

Your exit strategy may consist of the sale of a property or securing long-term funding such as a mortgage. It may also be looked at more favourably by lenders when your security property is already on the market because you have a detailed plan and time frame to repay the loan amount. 

The Security You Put Forward 

The more security you are able to put down as safety for bridging lenders to fall back on if you default on the loan, the better your chance of securing a bridging loan with bad credit. 

It means that along with putting a security property, you may consider offering extra security. You can also put down a larger deposit or offer additional property as a security to increase your chances of approval. However, keep in mind that whatever you are putting down as security is at risk if you do not make repayments on time.               

Which Credit Problems Do Bridging Lenders Accept?   

Most bridging lenders accept the application of bad credit borrowers with the following credit issues: 

• Previous bankruptcy

• Country court judgement 

• Defaults and late payments 

• IVA 

• History of payday loans 

• Debt relief order 

• Debt management plan 

• Home repossession  

That being said, you will still need a viable exit strategy to repay your bridging loan. Furthermore, you have to meet the eligibility criteria of the bridging lender you choose.      

If you need more knowledge about bad credit bridging loans, you can contact a broker to find the right lender. 

Can Businesses Get Bad Credit Bridging Loans? 

Yes, businesses with bad credit can secure a residential bridging loan. However, it highly depends on the reason why businesses have an adverse credit score and whether a lender finds that business strong enough to repay the loan amount. Lenders are most likely to accept the loan application if a business has a viable exit strategy and additional security. Eligibility criteria may also differ from one lender to another, so being rejected by one lender does not mean others will turn you down.       

Is There Any Alternative To Bridging Finance?

 

Although bridging loans offer numerous benefits, there may be more suitable solutions for some. If you don’t find bridging debt a perfect solution to fulfil your financial obligations, you can look for alternatives. 

Increasing the size of your mortgage and taking out an unsecured loan are potential alternatives to bridging debt. You can consider these options before taking out a bridging loan or when you find it challenging to secure bridging debt.  

In addition, there are lenders offering bad credit secured loans and various other types of loans for bad credit.

If you are looking for funds for your business, you can look for other commercial loans with bad credit, or you may consider a commercial mortgage. 

Conclusion 

Need a bridging loan but do not have good credit? Bad credit bridging loans can be a perfect solution for you. Bridging lenders are likely to accept your loan application even if you have a below-average credit score. However, you must have a strong exit strategy to get quick approval. Always keep in mind that the lower your credit score, the higher the interest rate. So only take a bad credit loan if you afford to repay.