Adverse credit history is a natural part of life for many of us. No matter how responsible people are expected to be when it comes to financials, life is a complex, often difficult affair, and adverse credit is often unavoidable when unexpected pitfalls occur.
But thankfully, all is not lost if you need a loan and have bad credit.
Bad credit bridging loans are one of the most promising forms of bridging finance available to those with adverse credit history. Granted an applicant meets other qualifications and eligibility requirements, a bridging loan with adverse or bad credit is certainly possible.
Are you currently in need of a loan but feel defeated due to a subpar credit history? Then a bad credit bridging loan may be the best option for you in this circumstance.
In this guide, we are going to explore all there is to know about bad credit bridging loans to help guide you on the path to securing a much needed bridging loan.
Are bridging loans offered to customers with bad credit?
In short, yes, bridging loans are certainly offered to customers with a less than stellar credit file. But there are some important aspects to keep in mind.
The good news is that due to the dynamics of bridging finance, getting a bridging loan with bad credit is a bit easier thanks to these loans being short term and primarily targeted around interest rates.
When seeking financial advice, one of the first things specialist lenders will advertise for those with bad credit, is a bridging loan.
Interest rates and having a firm and viable exit strategy are the most important aspects of bridging finance, and these two particulars are prioritised more than an attractive credit ranking.
Bad credit bridging finance is mostly marketed by a bridging finance lender, that makes it their specialty to helping people get a bridging loan with adverse credit.
In terms of mortgage details, the credit check is prioritised and credit problems will almost always be a hinderance to getting a loan.
This can also be a problem with some high end bridging finance lenders, because bad credit automatically in their minds puts the exit strategy up in the air, making the risk too great to advance.
But the right kind of specialist bridging loan lenders can help. These are the lenders that we like to work with since there is no initial bad news for an applicant with bad credit – saving lengthy checks which can often be a waste of time.
What bridging loans are available for customers with bad credit or poor credit rating?
First, second, and third charge bridging loans are all possible for those with less than stellar credit, but things begin to get a bit more precarious for second and third charge bridge loans due to risk for the exit strategy.
In terms of second charge bridge loans, this type of loan is rather rare in and of itself, so that is the first hurdle to overcome. Add in bad credit history, and this makes a second charge even more difficult to come by.
But there are lenders out there who will go forward with it if your other eligibility requirements are outstanding. A whole-of-market lender is likely the best lender to consult for second charge with bad credit, and we can work to find a viable lender in this niche for you.
In terms of a third charge status bridging loan, most bridging loans providers will be even harder to come by than a second charge.
If you have a good investment plan and your exit is solid, that will make a third charge easier to come by in terms of bridging finance providers.
Poor credit history is not an immediate barrier for a bridging loan, and something like a non status bridging loan can be even more easier to come by, even with less than stellar credit.
Non status loan, as part of the wider niche of non status bridging finance, are a short enquiry form of loan for property development of a residential property. These means that the interest only basis within the UK regulatory regime of property development is the main prioritisation of the short term loan.
Credit problems on a credit report are not barriers for the application process for these loan terms on a non status bridging loan.
What credit issues will bridging lenders accept?
Some of the most common credit issues that lenders will typically overlook are listed below.
Lack of credit
A lack of credit is not a barrier for a bridging loan since a bridging loan focuses more on interest payments and the exit parameters in lieu of credit rankings.
Low range credit scores
The same thing applies to a somewhat lesser degree with low credit rankings as well. The lender needs to be able to ensure that you can pay back the loan at the end of the term, and therefore, your exit will be the main aspect of interest.
Accumulation of late payments
Late payments, such as with payday loans or a personal loan amount will not be a barrier for most lenders during the application process.
If a bankruptcy shows up during a credit check for a bridge loan, this is perhaps the less severe of any of these issues. Granted the bankruptcy was not in the immediate past.
Defaults on loans
Depending on the loan amount that has been defaulted, defaults on some loans should not be an immediate barrier to a regular bridging loan.
If monthly payments or monthly repayments from mortgage arrears or on other debts are found, a thorough explanation will likely be required. But again, this is not an immediate denial of a loan application, especially if there is a good business plan in place for the loan term.
What are exit strategies in bridging finance?
The exit is likely the single most important aspect of a bridge loan in terms of whether or not the loan is approved.
The exit process is a plan that you must have in place when it comes time to pay back your bridge loan. This is a detailed plan that will include all arrangement fees as well as legal fees and other payments, in addition to a break down of the repayment process and how much you will pay by the expiration date.
The exit must also have a report by which you will ensure the collateral is satisfied, such as the time it may take to sell a home or property.
Non-standard exit strategy
A non-standard exit plan is for properties that are classified as non-standard. This can include various properties such as those with thatched materials and structures as well as flat roofs and other non-standard elements that high end lenders typically shy away from.
Non-status bridging loans
Non-status is created solely for property developers, who are by way of their profession, almost always sure to meet the eligibility criteria thanks to the collateral they can provide.
These loans are typically for developers seeking to acquire a non-commercial property or to avoid something like a buy-to-let (BTL) mortgage, since BTL mortgage details can be quite cumbersome.
What can be used as collateral against the loan?
There are a wide range of different types of collateral that can be used for bridging loans. By far the most popular type of collateral is residential property, and this is commonly assessed as a first charge.
But there are also possibilities for buy-to-let and commercial properties as well, and this is usually popular for those who are needing a loan for repairs or renovation and do not want to add these amounts to an existing mortgage.
And then there are also collateral options with land and even non-property assets as well. Practically any type of collateral that passes the inspection and valuation process provided by a lender can be used, as long as it is of a high value that can satisfy the loan amount.
Then there are also unsecured loans that are more attractive for those who do not have homes or properties to put up for collateral. This may also be a wider option for those with less than stellar credit as well.
An unsecured loan has a very short window of time for the life of the loan and this is typically a period of 12 months. Unsecured loans will also have much higher interest rates as well, but this is certainly an attractive option for those with credit problems.
Speak to a bad credit loan advisor
Just as there are those who provide mortgage advice, there also exists advisors that specialise in less than stellar credit in a valuation report.
It may be beneficial to also speak to a niche lender, which is something that we at bridging Options are aware of, and seek out for those needing bridge finance with patchy credit.
Why choose Bridging Options for your adverse credit bridging loan?
Bridging Options is a registered office with years of experience that allow us to constitute financial advice in the field of bridging finance.
It matters not if you have county court judgements against your or repossessions on file, we make it our commitment to connect you with lenders that can help you and not waste your time.
If you have less than stellar credit, contact us today and allow our team to assess your situation and steer you in the right direction towards acquiring bridging finance.