Bad Credit Bridging Loans

Key Takeaways

• Yes, you can get a bridging loan with bad credit.
• Bridging loans are secured against an exit strategy, not long-term monthly repayments.
• Your credit score is less critical unless your exit strategy involves securing a mortgage to repay the bridging loan.
• Bridging Finance specialises in helping you navigate both bridging loans and mortgages to ensure a smooth financial journey.

What Are Bad Credit Bridging Loans?

Bad credit bridging loans are short-term finance solutions specifically designed for individuals with poor credit histories. Unlike traditional loans or mortgages, bridging loans focus more on your exit strategy (how you’ll repay the loan) than on your creditworthiness. This makes them a viable option even if your credit score isn’t perfect.

At Bridging Finance, we’re dedicated to helping clients secure the funding they need, regardless of their credit background. We offer tailored advice and support to ensure you can move forward with confidence.

Why Can You Get a Bridging Loan with Bad Credit?

The key difference between bridging loans and standard mortgages lies in the repayment approach:

• Standard Mortgages: Lenders assess your credit score and financial reliability to ensure you can meet regular monthly repayments over several years.
• Bridging Loans: These are secured against an exit strategy, such as selling a property or refinancing. Because repayment isn’t based on monthly instalments, your credit history is less of a concern to lenders.

For example, if you use a bridging loan to buy a property and plan to repay it by selling another, lenders will prioritise the viability of this plan over your credit score. This unique structure makes bridging finance accessible to many with adverse credit histories.

When Does Bad Credit Matter?

While bad credit won’t necessarily stop you from securing a bridging loan, it could impact your financial journey under certain circumstances:

1. Exit Strategy Involving a Mortgage: If you plan to refinance your bridging loan with a standard mortgage after buying and refurbishing a property, your credit score will come under scrutiny during the mortgage application process. Poor credit could limit your options or result in higher interest rates.
2. High Loan-to-Value (LTV) Ratios: Lenders may be cautious if you’re seeking a high LTV and have bad credit, as this increases their risk.

At Bridging Finance, we not only arrange bridging loans but also assist with mortgage applications to ensure your exit strategy is secure. By addressing potential credit-related challenges early, we can help you find the most suitable solutions.

How Bridging Loans Work

Bridging loans provide short-term financing to bridge the gap between purchasing a property and accessing long-term funds. Here’s a step-by-step overview:

1. Application: Submit your application with the assistance of a broker to streamline the process.
2. Valuation: Lenders arrange a property valuation to determine its market value.
3. Approval: Once approved, funds can be released in as little as 72 hours.
4. Usage: Use the funds to purchase your target property, often breaking property chains or securing auction purchases.
5. Repayment: Repay the loan through your exit strategy—selling a property, refinancing with a mortgage, or another pre-agreed method.

To get an indication of how much your bridging loan will cost, try our calculator below:

Benefits of Bridging Loans for Bad Credit Applicants

• Flexible Eligibility: With a focus on your exit strategy, lenders offer more flexibility compared to traditional loans.
• Fast Access to Funds: Bridging loans are designed for speed, with funds often available within days.
• Diverse Use Cases: From buying unmortgageable properties to financing urgent purchases, bridging loans cater to various needs.
• No Monthly Repayments: Interest is typically rolled up into the loan amount and paid at the end, simplifying cash flow during the term.

Challenges of Bridging Loans for Bad Credit

While bridging loans are accessible to individuals with bad credit, there are challenges to consider:

• Higher Interest Rates: Bad credit may result in slightly higher interest rates to offset lender risk.
• Risk of Repossession: If you fail to repay the loan, your secured property may be repossessed.
• Limited Exit Strategies: Poor credit could restrict your ability to refinance with a standard mortgage, so planning your exit is crucial.

At Bridging Finance, we work to mitigate these challenges by offering expert guidance and personalised solutions.

Real-Life Scenarios for Bad Credit Bridging Loans

Buying Before Selling

If your current home hasn’t sold but you want to secure a new property, a bridging loan can help. With bad credit, lenders will focus on the sale of your existing home as the repayment method, not your financial history.

Buying Auction Properties

Auction purchases often require completion within 28 days. Bridging loans provide the speed needed to meet these deadlines, regardless of your credit score.

Renovating Unmortgageable Properties

Some properties are deemed unmortgageable due to their condition. Bridging loans allow you to purchase and renovate such properties before refinancing or selling.

Bridging to Let or Flip

Investors with bad credit can use bridging loans to acquire and improve properties, then either refinance onto a buy-to-let mortgage or sell for profit.

Costs of Bridging Loans for Bad Credit

The main costs to consider are:

• Interest Rates: Typically 0.68% to 1% per month, though rates may be slightly higher for bad credit applicants.
• Facility Fees: Charged by lenders, usually 1.5% to 2% of the loan value.
• Valuation and Legal Fees: Additional costs for property valuation and legal representation.

At Bridging Finance, we ensure transparency around costs and strive to find the most competitive rates for our clients.

Why Choose Bridging Finance?

At Bridging Finance, we specialise in helping clients navigate the complexities of bridging loans and mortgages. Here’s why we’re the trusted choice for bad credit applicants:

• Expert Guidance: Our team understands the unique challenges of bad credit and offers tailored advice to secure the best deals.
• Comprehensive Support: From initial application to arranging your exit strategy, we handle every step of the process.
• Fee-Free Service: We don’t charge broker fees, making our expertise accessible without added costs.
• Access to Specialist Lenders: We work with a network of lenders who are open to bad credit applications.

FAQs

Can I Get a Bridging Loan with Bad Credit?

Yes, as bridging loans focus on your exit strategy rather than your credit score.

How Quickly Can I Secure a Bridging Loan?

Funds can be arranged in as little as 72 hours, depending on your circumstances, but generally the process takes 3-6 weeks.

What Happens If I Can’t Repay My Loan?

Failure to repay could result in property repossession. A robust exit strategy minimises this risk.

Are There Extra Costs for Bad Credit?

You may face slightly higher interest rates, but a broker can help secure competitive terms.

If you’re ready to explore your options for a bad credit bridging loan, contact Bridging Finance today. Our team is here to provide expert advice and ensure a seamless financial journey.