Bridging Loans if I have Bad Credit?
Similarly to a mortgage, if you have bad credit then you may encounter a few obstacles, or the number of lenders willing to consider your application will be fewer, but you will be pleased to know that bridging loans are definitely available to people with a poor credit rating. Of course, the exact nature of the adverse credit will determine its impact on your application – lenders will still want to know the seriousness of the events, the amount of money involved, whether it was settled and how long ago this occurred.
However, as the loan is expected to be repaid once you receive monies from your last house sale, less consideration is given to the risk of default and if you are already holding a decent amount of equity or a sizable deposit (as well as any other financial assets) then this is likely to alleviate many lenders’ concerns. During their assessment of your application, lenders will run the usual credit checks but will take more than just the numerical credit score into consideration, often using their own process to determine your creditworthiness as well as making allowances for the context of any adverse credit events and placing more weight on your current circumstances. If you’ve had a clean record since your previous troubles, then this will count in your favour.
Read More The steps required to apply for a bridging loan and the criteria that applicants need to fulfil can be quite complex, even if you don’t have bad credit on your files. While you may need to take a few extra measures to ensure the smooth processing of your application, they should be worth the effort to achieve the purchase of the home you’ve set your heart on. The largest hurdle can be simply finding the right lender to suit your circumstances, but once that is done, any other tasks will feel less onerous. If you have items of bad credit on your records, the most effective way to ensure the smooth confirmation of your bridging loan is to enlist the services of an expert broker with a wealth of experience in this form of finance. They’ll be able to take a thorough look at your situation, identify if and where any real problems lie, and recommend exactly which lenders will be most sympathetic to your case. And when you are ready to take the next steps, they will be able to help with your application so that you present your finances in such a way that the lender’s decision will be an easy one.
The steps required to apply for a bridging loan and the criteria that applicants need to fulfil can be quite complex, even if you don’t have bad credit on your files. While you may need to take a few extra measures to ensure the smooth processing of your application, they should be worth the effort to achieve the purchase of the home you’ve set your heart on. The largest hurdle can be simply finding the right lender to suit your circumstances, but once that is done, any other tasks will feel less onerous.
If you have items of bad credit on your records, the most effective way to ensure the smooth confirmation of your bridging loan is to enlist the services of an expert broker with a wealth of experience in this form of finance. They’ll be able to take a thorough look at your situation, identify if and where any real problems lie, and recommend exactly which lenders will be most sympathetic to your case. And when you are ready to take the next steps, they will be able to help with your application so that you present your finances in such a way that the lender’s decision will be an easy one.
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.