Bridging Loans With Bad Credit
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How do I get Bridging Loan If I have Bad Credit?
Having bad credit on your files while arranging a new property purchase can be awkward enough. But if you find yourself in the position of needing a bridging loan so that you can fulfil the transaction while still waiting for the sale of your previous property to complete, then this can seem quite daunting, especially after having been through a similar process already with your mortgage.
The quickest and easiest way to start the ball rolling on getting a bridging loan with poor credit is to talk over your situation with an experienced broker. If you’re clear from the outset about your needs and objectives, they will be able to quickly get a handle on what products will be able to help you most. It’s important to be completely open with your broker and tell them everything they need to know – sometimes we have seen applications stall, or for people to apply for inappropriate loans, because a borrower withheld information. The more your broker knows about your circumstances and finances, the more focused and in-depth their searches can be.Read More
The research into which lenders will be most suitable for you will usually produce one option that is clearly the most favourable. The broker will then conduct a credit check to ensure the potential lender has the most up-to-date information on your credit profile (if you have also been recently arranging a mortgage, then it’s likely that you will have already corrected any errors), and also let you know what rates you can expect on the loan. If the lender is satisfied with the information the broker has presented to them, as well as the credit check, then the broker can move forward with the official application.
Upon receiving the application, the lender will get a surveyor to conduct a valuation on your new property, to ensure it is sufficient as security on the loan. If they are happy that it meets requirements, they will use all the available information to conduct a full assessment of your application and should be in a position to make a formal offer fairly quickly. If you confirm your acceptance of this loan offer, then your solicitor will then manage the process of getting monies transferred to your account or send directly to the vendor of your next property.
Getting a bridging loan can seem like quite a complex process, with a few stages to get through, but our task will be to make this procedure as smooth as possible for you, so you can achieve the finance you need with the minimum of stress.
Information on Bridging Loans With Bad Credit
Bridging Loans With Poor Credit?
Bridging loans can be a lifesaver when it comes to fulfilling the purchase of your new home. So named because of the way they can ‘bridge’ the gap between two financial transactions, the predominant use for a bridging loan is when you may have lost the purchaser of your current property as part of a property chain but still want to complete the purchase of your next home. The bridging loan will supply the finance for you to do so, and as such these loans are usually for greater sums than personal loans – sometimes up to 100% of the value of the property.
As is the case with a residential mortgage, lenders will generally want to ensure you have a healthy credit report when looking at your bridging loan application and will run the usual credit checks to find out the relevant information. If you have a long and unblemished history of responsible borrowing, then you will be in a strong position when it comes to being accepted for the loan and obtaining the best possible interest rates. If you have a poor credit record, then this may limit your options.
Having a poor credit profile may mean certain lenders will not be open to you – especially those on the high street, but it will not mean that you will be shut out of the system altogether. Because bridging loans are a short-term form of finance, secured against the value of the property you are moving into, with the expectation of monies coming through from the sale of your current property in not too long a period of time, a lender is likely to be less troubled by a few black marks in your past.
A lender’s attitude will depend on the exact nature of your bad credit, but it’s most likely that you will not be refused a bridging loan because of it. You might simply have to pay an interest rate a little higher than if you had a completely clean credit history. Below, we’ll go into the various aspects of getting a bridging loan with adverse credit.
What Credit Issue will Bridging Lenders accept?
If you have adverse credit on your records you may be wondering which particular kinds of issues will cause you the most problems with a bridging loan provider, or if there are some that they are usually more willing to accept. Any kind of bad credit in your history will inevitably make a lender perceive you as a slightly higher risk than if you had an unblemished record, but the truth is that bridging loan lenders do not usually decline applications based on bad credit issues. Instead they will usually impose a higher interest rate to allow for the possible increased risk.
If you have dealt with a mortgage while having a bad credit report, you will know that most conventional mortgage lenders adopt fairly strict criteria over what they are willing to accept in an applicant’s credit file, with most refusing loans to those with a poor credit history. The approach is quite different with bridging loans, and lenders make an assessment based on your current financial circumstances, the amount of equity you already have in the property and situation with the sale of your current property.
As the money to repay the bridging loan should be due soon (typically within the next twelve months) and the loan is short-term, then the risk of a default is comparatively low. Bridging loan providers are typically willing to accept applications from people with discharged bankruptcy, CCJs, IVAs, default notices, DMPs, missed mortgage payments, missed unsecured credit payments, little or no credit history, and more besides. There is only one stipulation – that the adverse credit issue must not affect the exit strategy to repay the bridging loan.
Our team includes brokers with plenty of experience of bridging loans who will be able to make a thorough assessment of your circumstances and your options. They will also ensure you have a credible exit strategy for the loan, particularly if this will entail borrowing funds from another lender.
Can I obtain a Bridging Loan without a Credit check?
Unfortunately, a credit check is a vital part of applying for any kind of finance, and it will never be possible to obtain a bridging loan without one. During the application process, both your broker and the lender will conduct a credit check as a matter of routine, so it will be important that all the information on your credit records is accurate, up-to-date and as positive as possible in order to show your borrowing patterns in the best possible light. If you have recently been through the process of getting a mortgage or remortgage, then you may have already taken steps to correct any inaccuracies and improve your credit history by settling past issues where possible and making prompt payment of all current instalments or balances when due.
It’s worth bearing in mind that a credit check protects the potential borrower as much as the lender. It could be that you are in a more serious financial position than you or the lender realised and would not be in a position to service the additional debt. Without a check, you could be granted a loan that would most likely put you in even deeper financial trouble, further impacting your ability to run your household, keep a roof over your head and maintain the wellbeing of those around you, let alone obtain more finance in future.
You may be worried about what a credit check will reveal, but, when it comes to your finances, accepting any problems and finding a way to tackle them is always the most positive route forward. You should also bear in mind that while your credit rating as compiled by Equifax, Experian and TransUnion (the three main credit reference agencies) will deliver a numerical score, lenders will rarely base their decisions purely on these results. Instead, they will consider your broader credit profile and current borrowing habits and transactions, to get a fair picture of your creditworthiness.
The overall perceived level of risk will be more important to a bridging loan lender than the results of the credit check, so you should not worry about falling victim to a ‘computer says no’ style of approach. Your credit profile is just one part of the application process, and not the only thing they will consider when deciding the interest rates they are willing to offer on the loan.
I have a low Credit Score - can I get a Bridging Loan?
First, the good news: you only have a low credit score, not a bad score or a history of severe credit issues. Any challenges you face in your search for a bridging loan will be relatively minor compared to potential borrowers with more serious financial issues or a history of bad credit. The other good news is that lenders of bridging loans typically concern themselves less with your credit score and more with ensuring the loan is secured against assets and you have a solid repayment or exit plan, so a low credit rating is really only a minor setback. You should certainly be able to get a bridging loan with a low credit score.
What causes a low credit score? You may have one due to one or two minor blemishes on your credit record, such as a missed or late payment on your phone bill or overdraft arrangement. Or it could be simply because you haven’t made much use of borrowing or credit – with too little or no credit history, there is not enough information about your approach to finance to make a judgement. Lenders will recognise this and, rather than view you as an outright default risk, take it into account when deciding what interest rate to charge.
In all these cases, our task as a broker is to present your application as thoroughly as possible, with full details of your income and assets, to make a lender’s decision as easy as possible. Bridging loan providers usually conduct their assessments and underwriting on a manual basis, meaning they will look at all aspects of the circumstances around your assets and the loan as well as your credit profile when making their decision. This can include such factors as your plan for how you will use the finance, your exit or repayment strategy, property value, amount of equity or deposit and any other related experience with loans, as well as your other financial commitments and income.
So, while it’s very unlikely you’ll be refused a loan because of a low credit score, a lender may charge you a slightly higher rate of interest. If you want to find out more about your options for a bridging loan with a poor credit score or items of bad credit on your files, please get in touch with our team today. One of our expert advisers will be more than happy to answer your questions in a free initial consultation and give you pointers for the next steps to take.
Bridging Loan Advice If I have a Bad Credit
If you have a history of bad credit and need to apply for a bridging loan, then it’s highly likely you’ll need to take specialist advice. Although lenders of bridging loans tend to look differently at the security for their money – putting greater emphasis on your assets, equity and property – high street banks and providers are still quite risk-averse. If they are not willing to grant your borrowing, then you’ll need to look at options among specialist lenders, who will only take applications through trusted third parties like experienced brokers.
Whether you need a bridging loan to secure your next home ahead of the sale transaction of your current home, or for a development project or a business expansion, there are a number of things you can show or provide that will encourage the lender to give their approval. Principal among these are:
A decent-sized deposit or level of equity in your property. This will reduce the lender’s exposure to risk of default and also show your own commitment to the purchase or project.
A viable exit strategy. This is a key aspect to a bridging loan application – with the loan being comparatively short-term, the lender will be most concerned with your plan to repay the money, and for this to be as straightforward as possible. In the case of a house purchase, the exit strategy is usually the funds you receive from the sale of an existing property, which should cover the funds you need to borrow.
Previous property development experience. If you can show a record of having successfully achieved completion of new building projects and their sale, then this will give lenders much more confidence in your credit status.
A thorough project plan. In the case of the bridging loan being for a property development project, a complete, detailed analysis of every aspect of the project, including the projected timeline, allocations of resources and budgets, will go a long way to help your application.
A solid business plan. Similarly, if the loan is to fund improvements in your business ahead of other investments or to cover major outlay until funds from clients come through, then a detailed business plan with projections based on solid data will be of great benefit.
A key factor in achieving a successful response to your application is presenting your circumstances, plans and requirements in the most positive light. You’ll want to make sure it’s as easy as possible for the lender to make a decision in your favour, especially if you are applying with a history of bad credit.
As expert brokers, we know what lenders are looking for in an application and can help you to package yours so that it gets the greatest chance of success. Get in touch with our team today and one of our advisers will let you know exactly how we could help in your case.