When it comes tom accessing a loan, bridging loan, bridging finance or other types of loans, low credit or adverse credit can be one of the biggest stumbling blocks to getting the finance you need.
There can be a variety of reasons why a client may have adverse credit or bad credit, and given the recent economic circumstances across the country you certainly wouldn’t be alone in that respect, with the Bank of England estimating a growing number of consumers have experienced a bad credit event over the past 2 years.
That being said, adverse credit or bad credit needn’t get in the way of you accessing bridging finance, depending on your circumstances and what you’re looking to access a bad credit bridging loans for.
More often that not, bad credit isn’t attained purposely or even through situations that our clients can control, and although they earn a good salary and have a good track record of business success they often find themselves refused for credit or for loans despite this.
Luckily, we’re able to give you free advice around this and look at the options available for you, perhaps with a bad credit bridging loans or other types of loans. We’re confident that even if you’re suffering from bad credit we can find a solution for you, and we’ll explain why bad credit doesn’t always exclude you from credit or bridging finance.
Can I get a bridging loan if I have bad credit?
In short, yes you can. Bad credit is subjective, after all, and many lenders have different criteria and different expectations when it comes to what they consider credit worthy and what they consider to be a risk.
There is, however, a key difference between, for example, a commercial mortgage and bridging finance. When it comes to long term finance or loans, the lender will often want reassurances that the client can commit to their repayments over a long time, sometimes with little security should the loans default.
With bridging finance it’s different in that the lender only wants the loan covered by an asset or by security. If that criteria can be met to differing degrees then many of the lenders on our panel will consider providing bridging finance.
Do lenders do a credit check?
Yes, most lenders will perform a credit check when vetting you for loans or bridging finance. This gives them a better idea of what your repayment history is like and they will obtain this, even bad credit, from the credit reference agencies, all of whom will provide you with a copy of your credit report online.
Some will charge you for a more detailed overview of your credit report but all will provide you with a copy of your statutory credit report if you ask for it, as they’re required to do so by law.
Bad credit needn’t exclude you from bridging finance, however, as most bridging loan companies use this as a starting point and will then look at other factors such as the security you’re able to provide and your track record in business or property development.
What do lenders check?
When it comes to a credit check, there are a few things that most lenders will want to see. Firstly, they want to know that you’re on the electoral register and how long you’ve lived at your current address.
Secondly, they’ll want to know what your payment history is like on your other accounts. If you’ve missed payments on your credit card, for example, this will mean bad credit as you’re unable to keep up to date with payments. If you’ve missed 3 payments or more this often means that your account has gone into a default, and these badly affect your credit report.
Lenders will also look at things like how often your credit file has been searched, indicating you’re desperate for credit, whether you’re using all of your available credit limit, suggesting you’re struggling, and whether you’ve opened up many accounts over recent months, indicating you’re desperate for credit.
That’s traditional lenders, however, and when it comes to bridging loan lenders they’re a little different in that, although they’ll take similar stuff and bad credit into consideration, it often isn’t the most important aspect of their decision.
What might cause lenders to say no to bridging finance?
Each of our lenders have different criteria and so it’s always worth seeking the advice of one of our brokers before looking to apply, however, there are some eligibility criteria that may mean you don’t receive an offer.
If you’ve been declared bankrupt, have an unsatisfied bankruptcy or a debt relief order or IVA this is very likely to mean that lenders won’t be able to fund you. Similarly, if you have no security or assets to provide security against your loan as well as bad credit then your chances of funding are slim.
Bridge Loan Calculator – Work out how much you will have to pay back
If you’re looking for a bad credit bridging loan, or a bridging loan more generally, then the easiest way to see if you’re in a position to repay the bridging loan is to use our easy calculator which can show you how much your loans would cost.
Simply enter the requested details to get a good idea of what the cost would be.
Can I get a bridging loan with a no deposit?
In some circumstances yes you can, but this is a specialist area and you’d need to seek the advice of one of our brokers first to double check whether you might qualify for these types of loans or a bridging loan.
Some lenders will offer 100% Loan To Value (LTV), but again this will depend on your income, track record and also what type of security you can provide against your bridging loan.
If you’re able to provide an asset against the bridging loan or loans you’re looking to agree that covers most of the value then you’ve got a good chance of being able to agree funding.
I’m bankrupt, can I get a loan?
This is a specialist area where we highly recommend that you seek advice from one our experts who can guide you through this process, however, yes there are situations where you may be able to secure a bridging loan or loans even whilst bankrupt.
It’s not particularly easy but there are certainly lenders who may be willing to approve lending for you for some types of loans or a bridging loan.
Non status bridging loans
A non-status bridging loan may be a good option if you have bad credit as they are specifically designed for property developers who may have a poor personal credit history or bad credit.
They are a specialist type of finance that are for residential property developers to raise finance, release equity, and also means that lenders are willing to take on a higher risk appetite with their clients.
What impacts my eligibility for bridging finance?
Generally speaking, bad credit won’t necessarily affect your eligibility for bridging loans too much compared to other areas, so here are the 4 main areas that may affect you over months for a property development, for example.
Broadly speaking, because bridging loans are designed to be short term, you’ll need to show your lenders that you have a solid, costed and reasonable plan to pay your finance back in the time period agreed. This could be, for example, a business plan.
If you’re looking to use bridging loans to purchase a property either for development or for another reason then you’ll need to display to your lender what the value of the property is. That may come in the form of a valuation or a survey or may come in the form of a desktop evaluation where you can send pictures of the property to an evaluator for an instant appraisal.
If you already have a mortgage on a property, either residential or commercial, this can affect your eligibility by either showing your lender that your payment history is good and that you’re able to manage your debts well and responsibly, but also it could improve your chances by giving you an asset that you can use as security against bridging loans.
If you use an existing property with a mortgage as security, this is known as a second charge loan and this would entitle your lender to seek to claim your property as payment if you were to fail to repay the bridging loans on time.
A poor credit history won’t necessarily disqualify you from getting a bridging loan, however, it may affect the rates you get in interest and also the terms of the loan.
If there are a few blemishes on there then the chances are that it won’t make a huge difference and the lender will be willing to overlook this in favour of a good business plan, strategy and exit strategy as well as good security on the loan.
The best advice is to speak to one of our brokers who can go through the process with you in detail and assist you further.