Getting a Bridging Loan with Bad Credit

Everything you need to know about getting a Bridging Loan with Bad Credit and how to secure the best rate

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Home Bridging Finance Getting A Bridging Loan With Bad Credit
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: April 24, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

April 24, 2024

If you have a history of bad credit, 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’s 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 adverse credit may find that the rate extended to them is not as favourable as applications made from those with clean credit histories.

Why are bridging lenders more open to bad credit?

Bridging finance is a type of ‘unregulated’ finance, which means that lenders have more flexibility to offer bespoke deals on their own terms. This means that there is no rigid criteria for borrowers with bad credit to meet. The lender can assess anyone with credit problems on a case-by-case basis.

Generally speaking, lenders will judge an application based on the strength of the investment and will only consider adverse credit a deal-breaker if it puts the exit strategy at risk.

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How to get a bridging loan with bad credit

Your first step should be to find a bridging finance broker who specialises in bad credit as this will boost your chances of approval and landing a good deal. Make an enquiry and we will match you with one for free.

The advisor we pair you with will walk you through the following steps:

  • Evidencing your exit strategy: This could mean providing a valuation report and evidence that the property is sellable, or having a remortgage offer on the table if you are planning to refinance to clear the debt.
  • Downloading your credit reports: Although bad credit isn’t usually a deal-breaker for bridging loans, it can be beneficial to download your credit reports and optimise them with a broker, especially if you will need to remortgage for the exit strategy.
  • Finding the right lender and best bridging finance deal for you: The brokers we work with have deep working relationships with bridging finance providers and often have access to exclusive deals for borrowers with poor credit.

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What checks will the lender carry out?

If you have bad credit, the number one thing the lender will check is whether this might impact the exit strategy. For example, if your plan is to remortgage, they will be keen to see that the severity of your adverse credit won’t prevent you from qualifying for one.

Expect them to see evidence of development experience or a strong track record in property if the loan is for this purpose, and if it is for a commercial venture, a business plan may need to be presented, which the lender will scrutinise to assess the strength of the investment.

Finally, the lender will be keen to see that you have enough deposit and will also expect proof of the source of those funds.

How to improve your chances of approval

Despite having poor credit, you can strengthen your application by having:

  • A healthy deposit: The best deals kick in if you have 40% or more
  • A sound business plan (for applications for commercial purposes): This can help convince the lender that the investment is viable
  • Property development experience (for applications for development): Lending to first-time developers is riskier for lenders, though it’s not impossible to find a good deal with no experience in this field
  • Assets to help secure the loan: This will bring down the loan to value ratio and potentially open you up to a wider range of deals

When is bad credit a dealbreaker?

There will be types of credit problems that are more of an issue and could be a dealbreaker. Lenders will always look at how your 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 someone has missed a mortgage payment three years ago, but otherwise has a clean history, that will likely not affect their application.

More severe issues

There are times when bad credit issues may stop your application from progressing. You might be declined if you…

  • Have recently been declared bankrupt
  • Have recently been involved in a repossession
  • Are part of a debt management scheme
  • Have a CCJ against you

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.

How much could you borrow?

There is no strict maximum cap on the amount you can borrow and the exact figure will depend on the strength of the exit strategy. Having bad credit won’t change this. If the exit strategy is viable, the lender will still consider letting you borrow that amount, provided your adverse credit doesn’t put the exit in doubt.

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Use this calculator to determine how much you could potentially borrow for a mortgage, based on the typical salary multiples used by most UK lenders.

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You could borrow up to 

Most lenders would consider letting you borrow

This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.

Some lenders would consider letting you borrow

This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.

A minority of lenders would consider letting you borrow

This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.

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Bridging loans for businesses with bad credit

Like personal applications, businesses with bad credit may still find they can access a bridging loan.

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 poor 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 at 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

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 finance applications, having a certain score or ‘black marks’ on your history will not always be immediate grounds for refusal.

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.

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.

Yes. If you hold enough equity in your property to act as a deposit for a bridging loan, this could be one option to stave off a bankruptcy. You would then need to remortgage to add the debt to your home (unless you plan to sell the property), so whether this is an option for you will depend on your eligibility for a remortgage.

Yes, but you might need a specialist lender for your remortgage if that is your exit strategy. This is because you will have missed payments or arrears against your name, making you higher risk to potential remortgage lenders.

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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 Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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