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Bad Credit Bridging Loans

Want a bridging loan, but have a bad credit history? Read on to find out how you can still successfully apply for one.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 20, 2022

Bridging loans are short-term finance, typically faster to arrange than a traditional mortgage. They often come with a higher interest rate, but they are flexible and can be used for many reasons – not just for buying a property.

If you have a bad credit history, you may wonder if your bridging loan application would be successful. Here, we look at how bad credit doesn’t have to prevent you or your business’ chance of securing this form of financing.

Can you get a bridging loan with bad credit?

Yes, it’s possible. Bad credit will not automatically block you from being approved, as lenders have a more flexible approach to bridging loan applications. However, those with bad credit may find that the rate extended to them is not as favourable as applications made from those with clean credit histories.

Lenders will always carry out a credit check. However, if the following parts of your application are strong enough, you vastly improve your chances of being approved even with a bad credit history:

  • Your exit strategy: An exit strategy is how you plan to repay the loan at the end of its term. They’re important to lenders as it helps them evaluate how risky lending to you is. Lenders will want to be satisfied that how you intend to repay the loan is viable.
  • Other forms of asset security: Security will come in the form of a deposit, other properties or other income. They’re used to provide the lender with the peace of mind their lending can be repaid in the event your original exit strategy doesn’t materialise as planned.

Usually, most bridging loans are offered on a ‘closed’ basis – where your repayment plan is already organised and in place. However, some lenders can offer loans on an ‘open’ basis, where you do not have a repayment plan, though they’re far less common.

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How to get a bridging loan with bad credit

While lenders may be more flexible in their approach to applications for bridging loans – with or without bad credit – there are some simple steps to improve your chances of approval:

  1. Get your documents together. Preparing your paperwork in advance of your application can help speed up the process even more. Collate key documents like proof of address, proof of ID and any proof of income or bank statements required for an application. Proof of income or bank statements that strengthen your current financial position can be particularly helpful – especially if you have past credit issues. They can show how you can still cover repayments despite historic credit problems.Finally, now is the time to pull together your exit strategy to ensure that it is watertight. With a bad credit history, it’s particularly important to emphasise you are capable of paying back the loan.
  2. Run a credit check on yourself. While you may know that you have had issues with bad credit in the past, you may not know specifically what the issues were. Downloading your credit report will allow you to see what those problems were. You can either take steps to have those ‘blackmarks’ removed from your report if they are erroneous, or you can start to build an argument as to why they are not a problem for your loan repayment now. For instance, if you are using the loan to refurbish a property which you plan to sell to settle the outstanding balance.
  3. Speak with a bad credit bridging loan specialist. Seeking advice from an experienced broker is one of the best ways to improve your chances of getting a loan. They will know which providers to approach given your specific bad credit history. They can guide you through the process and ensure you only ever apply for a loan from a lender for whom you meet the eligibility criteria.

Our free matching service can help you connect with the broker most suitable for your needs and situation.

When is bad credit a dealbreaker?

While bridging loan applications are taken on a case-by-case basis by lenders, there will be types of credit problems that are more of an issue and may be a dealbreaker. Lenders will always look at how that bad credit history currently has the potential to affect a repayment plan or exit strategy.

The following credit problems are more likely to be ‘overlooked’ on an application that has a strong exit strategy and a large deposit:

So, for example, if a person has missed a mortgage payment three years ago, but otherwise has a clean history, that will likely not affect their application. However, there are times that bad credit issues may stop your application in its tracks. You may find that if you:

your application is not going to be accepted by providers. If those issues are far in the past, you may find that they are no longer an issue. For example, if you were involved in a bankruptcy that was settled over five years ago, but your exit strategy is still viable, you could still be accepted.

If you have a lot of debt that has accrued late payments, your application needs to show that you are able to repay your bridging loan with your exit strategy, and not just pay off your debts. If there is a high risk you won’t repay your loan, then your application is likely to be refused.

An experienced broker will know the lenders who consider specific bad credit history events as grounds for refusal and can suggest other providers instead. Plus remember, despite having bad credit, you can strengthen your application by having:

  • A healthy deposit
  • A sound business plan (for applications for commercial purposes)
  • Property development experience (for applications for development)
  • Assets to help secure the loan

Bridging loans for businesses with bad credit

Like personal applications for bridging loans, businesses with bad credit may still find they can access this form of financing.

Again, all lenders have different approaches to bridging loan applications and consider them on a case-by-case basis too. Often the outcome is highly dependent on the strength of the exit strategy. Therefore, a business with bad credit marks against its name can still have successful applications if that bad credit does not affect their repayment plan. The rates offered to them, though, may not be as favourable.

Get matched with a bad credit bridging finance broker

Bridging loan applications may have a certain degree of flexibility, but that does not make the process easy. Using an experienced bad credit bridging finance broker can save you time, stress and money thanks to their expertise in the field. They’ll know what lenders are suitable for you to approach, which will improve your chances of being approved with the lowest rate possible.

Our no-obligation matching service is free and will pair you with the right advisor for your specific circumstances. Call 0808 189 2301 or enquire with us today to be put in touch with the best broker for you and kick things off with a free, no-obligation chat.

FAQs

Can I get a bridging loan with no credit check?

No, your credit score or a business’s credit history will always be checked when applying for a bridging loan. Usually, the better the history, the better the rate secured. However, as lenders have a flexible approach to bridging loan applications, having a certain score or ‘black marks’ on your history will not always be immediate grounds for refusal.

What is a non-status bridging loan?

This form of bridging loan is when your loan is secured against an asset. As a result, the value of that asset and how easily it can be sold are vital considerations for lenders. These loans usually attract a high interest rate, but your personal income will not be as important to your application.

Do you need proof of income for a bridging loan?

The flexible approach that bridging loan providers take when considering applications means that proof of income is not always required – though it can help. Bridging loans are usually highly dependent on the strength of an applicant’s exit strategy, so if that is strong enough, a lack of income evidence may not be an issue.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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