Bridging loans are a common solution to a short-term problem or opportunity which needs money to resolve or realise it.
This guide examines the issues of arranging a bridging loan with bad credit, and offers guidance on how you can arrange a bringing loan, even if your credit is bad.
Can you get a bridging loan with bad credit?
Yes. While bad credit is often a negative factor when applying for loans, it isn’t an automatic barrier to arranging a bridging loan. Your bad credit might make it harder to arrange suitable finance, but you shouldn’t consider these circumstances fatal in your plans. When mentioning bad credit this refers to missed payments, defaults, county court judgements and there are bridging finance lenders that could help.
Can I get a bridging loan with no credit check?
No, a lender will always consider your credit profile when they review a bridging loan application. It stands to reason that the better the profile, the more likely a lender will offer a loan or a loan on improved terms.
However, many lenders are flexible, and there are specialist lenders who provide finance for people with poor credit scores.
It is helpful to remember that your credit profile is just one factor considered by a lender, and if you can improve other aspects of your application, you improve your overall chances of success.
Do you need proof of income for a bridging loan?
Providing proof of income is not always required for a bridging loan application, however the lender will want to know how you are supporting yourself financially. With a lot of bridging loans there are not monthly payments to make instead these payments are rolled into the finance and you pay these when the bridging finance is redeemed.
How do I arrange a bridging loan with bad credit?
The following factors all influence a lenders’ decision, and the better they are, the more likely it is a lender will approve your application:
Being able to place a sizable deposit
The quality and desirability of the asset you wish to buy
A sound business plan for the asset
Renovation and upgrade plans for the asset – including showing a track record in this line of work
A track record or experience in managing property
An exit strategy detailing how the finance is to be repaid
These are all crucial factors in an application, and you’ll hopefully see that working with others will enhance your application. If you lack the experience or track record in a specific field, partnering with someone enhances your application and provides a lender with confidence.
Similarly, working with a specialist broker who deals with bridging loans for bad credit clients will help you immensely. These brokers know which lenders are more receptive to these financial solutions, and they’ll help you make the most robust application. Skilled brokers will even help you develop business plans and an exit strategy, enhancing your chances of arranging the finance and paying off the loan in the agreed manner.
Your deposit matters
As with all mortgages or loans, a deposit is considered necessary for a bridging loan, and you should expect to pay at least 25% of the assets’ value. If you can pay more, your application is likely to be judged more favourably.
The asset is crucial for bridging loans
The lender will consider the asset you wish to buy, and its value and desirability impact their decision. If the lender agrees there is good value in the asset and that it can play a role in generating profits, it is more likely they’ll approve a finance request.
This means buyers must review the market and focus on good-quality assets before making an application.
A sound business plan helps
Lenders will view the application more positively if you showcase genuine plans and have a track record or understanding of how to maximise returns from the asset.
The business plan depends on the asset. If you plan on flipping a property for profit, you should showcase redevelopment skills and a reputation for selling property in the marketplace. If you intend to let property, property management skills are important.
Your business plan should go into great detail, and if you have no skills in this area, detail the professionals you’ll hire to work on your behalf. You don’t need to do everything by yourself; if you showcase your ability to work with trusted professionals, lenders are more likely to welcome your application.
Have an exit strategy
While every element is vital in making a robust application, lenders care about how they’ll get paid. The more confidence you develop in them about how you’ll raise funds to pay off the finance, the better.
An experienced broker who has helped clients with bridging loan applications understands the importance of an exit strategy. This is why a bad credit profile isn’t necessarily a financial barrier.
If your application informs a lender of your ability to generate a return which helps you repay the loan while enjoying a profit, it is a good application. If you can bring together external factors, market demand, a track record of success in this sector, and a detailed plan to pay off the loan on the agreed date, lenders are far more likely to overlook a bad credit rating.
Bad credit profiles impact your ability to secure finance, and you should always take steps to improve your credit rating. However, credit profile alone doesn’t prevent you from arranging finance. With a good plan and help from experienced professionals, you can arrange a bridging loan which allows you to capitalise on a great opportunity.
Key takeaways when arranging a bridging loan with bad credit:
It is possible to arrange a bridging loan, even if you have bad credit
Credit is just one factor considered by a lender, alongside the deposit, business plans, experience, the asset and the exit strategy
Working with experienced specialists provides confidence to lenders, and helps you make informed decisions
How to explore your bad credit bridging loan options with The Money Hub
If you are looking to arrange bridging finance while having a poor credit profile, help is available.
Call The Moneyhub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated bridging loan advisors or you can complete an enquiry form which will allow you to schedule a call time.
When applying to borrow money you should always look at all your options, i.e. standard mortgage, unsecured loans, secured loans and compare these verses the cost of a bridging loan. In many cases a bridging loan is the only possible finance solution due to the property’s current state or development plans you have. Speaking to an experienced adviser will help you make this decision.
This will depend upon the asset you wish to buy, development plans and final end value (GDV). Typically you can borrow up to 75% of the purchase price and some lenders will also help you raise money for the development costs also.