Bridge financing is a fast and flexible solution to multiple financing needs, but can you apply for bridging credit with bad credit? Here, the Revolution team explains the likely impact of bad credit on your bridge financing brokerage application and the options available to improve your chances of approval. For more information on specialist bad credit loans or to compare UK market bridging loan rates, please contact us at [emailÂ protected] or call us on 0330 304 3040.
Can I get a bridging loan with bad credit?
Usually yes, even if you have had several credit problems in the past, a full market broker such as Revolution can negotiate the terms on your behalf. Bridging financing is short-term and only on interest, so the most crucial factor is your exit strategy – how you will pay off the original loan value at the end of the term. Bad credit can make it more difficult to apply if:
- There is doubt about the soundness of your exit strategy (for example, if you are considering remortgage but do not yet have an agreement in principle).
- The lender is concerned that you will accumulate other credit problems.
- Your credit does not meet the terms and conditions of the lender’s policies.
However, it is usually possible to find a good deal and liaise with underwriters to mitigate any risk exposure that concerns them.
Acceptable credit issues with a bridge financing request
Most bridging finance providers can ignore less serious credit problems, as long as they don’t anticipate that your credit will interfere with your exit strategy. These issues include minor credit issues such as late payments, defaults, low credit score, or lack of credit history. Even if you have more extensive credit issues, such as CCJs, IVAs, or even bankruptcy, a niche bad credit specialist will often offer terms, albeit slightly higher than if you had a clean credit history. As long as you can show how you’ll pay off the bridging loan, your credit history probably isn’t going to stop you from applying.
The benefits of bridging loans through a bad credit broker
Revolution has years of experience negotiating bridge financing agreements. Our network of bad credit lenders offers flexibility and considers each request on a case-by-case basis. All bridging loans require a credit check, but a lender often does not manage a credit score like a conventional bank because they use a manual assessment process rather than an arbitrary credit score. Without a doubt, if you have a good credit rating, you will benefit from better rates, but you can get approved for a bridging loan with bad credit.
Eligibility factors in bad credit bridging loans
In addition to your credit history, a lender will assess other factors, such as:
- The strength of your exit strategy
- What is your experience in real estate development, if any
- The property against which you are guaranteeing the loan
- Your business plan, if it is a business bridge loan
- What deposit do you have?
The exit strategy is the essential eligibility criterion since a bridging loan only bears interest. Therefore, you will generally not make interim repayments on the principal balance until the end of the term. Suppose the property is worth more than the loan amount (or is expected to be appraised as such after the work is completed) and you have an existing remortgage offer or proof that you will be able to make a profitable sale. In this case, a lender will often overlook any credit problem.
Appropriate Exit Strategies for Bad Credit Bridge Financing
To mitigate the risk associated with your application, you should work with an experienced broker to make sure your exit strategy is acceptable – before you apply. Some bridge lenders will accept exit strategies that are outside the norm, such as an inheritance that has not been probated or an investment. However, many traditional lenders have strict rules on acceptable exit strategies, so this is not typical. Here are other ways to make your exit plan more sustainable:
- Use a second property or another asset as additional security.
- Submit a detailed business plan showing that your investment is a solid proposition.
- Provide evidence of previous experience in similar projects.
You can also increase your deposit to offset any perceived risk. Most bridging loans require a deposit of at least 30-35%. If you can offer a larger down payment of 40% or more, the lender is more likely to accept your request for bridging financing, regardless of your credit problems. Second charge bridging loans are rarer with bad credit. Yet again, it’s about selecting the most suitable lender and structuring your application to demonstrate how you’re going to repay the loan. For advice and help comparing bridging loan rates or identifying lenders with a flexible approach to bad credit applicants, please call the Revolution Brokers team or email us to arrange. an opportune time to speak.