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Bridging loan with bad credit

Last updated on 7th February 2024 by Martin Alexander

Getting a bridging loan with bad credit is typically easier than getting other forms of finance with a poor credit history. For instance, a bridging loan could be a suitable alternative if you can’t get a mortgage because of your credit rating.

If you’ve already been declined a mortgage, you may still be eligible for a bridging loan. Your credit file gives lenders an indication of your borrowing conduct. Of course, a poor credit score doesn’t give you the best chance of approval, but it’s still possible.

If you’re unsure, read our article on bridging loans here to learn how it works. It’s important to understand the risks involved with certain products before applying.

Can I get a bridging loan with bad credit?

Getting a bridging loan with bad credit is possible, but not all lenders accept credit issues. As a result, the first step is to approach a suitable lender. Furthermore, your exit strategy can also determine whether you’re approved. For instance, an exit plan to remortgage can be deemed high risk as you’ll need a mortgage lender to approve you based on your credit rating.

Bridging loans are a form of short-term finance that will require an exit plan on how you’ll repay the loan. Lenders will assess your proposal and can make a quick decision on whether your application is suitable. You’ll also need a strong proposal, as failing to repay the bridging loan will result in further credit issues.

What type of credit problems do bridging lenders accept?

A bridging loan is possible with the following credit issues:

  • County court judgement (CCJ)
  • IVA
  • Previous bankruptcy
  • Defaults and late payments
  • Debt management plan (DMP)
  • Debt relief order (DRO)
  • Home repossession
  • History of payday loans

That being said, you’ll still require a viable exit plan to repay your bridging loan. Furthermore, you’ll need to meet the criteria of your bridging lender.

Why are bridging lenders more open to bad credit?

Although getting a mortgage with bad credit is possible, it’s often still difficult. It’s likely to be more challenging to get a mortgage than it is a bridging loan. There are several reasons for this.

A bridging loan is short-term, whereas a mortgage is typically long-term. Short-term loans carry less risk for lenders, as they’re typically repaid in full within a year. Mortgages, on the other hand, are usually repaid monthly over a term that can exceed decades.

A shorter timeframe leaves little chance of things going wrong. However, a lot can happen during ten or twenty years. Lenders also have the incentive that their loans will be repaid much faster.

The second point is that both mortgage and bridging lenders will place a charge on your property. The good news for bridging lenders is that your asset isn’t likely to fluctuate much in the time given for the loan. In comparison, there is a chance your property could plummet in price, given the long-term nature of a mortgage. This can leave lenders with an asset worth less than the mortgage.

Risk is even more apparent when bad credit is involved. However, bridging loans pose less risk to lenders, so they’re more likely to be approved, even with credit problems.

Can I get a bridging loan without a credit check?

Unfortunately, a bridging loan isn’t possible without a credit check. This is because a credit check is a key part of any finance assessment, and bridging loans are no different. That said, lenders will assess each case in-depth and won’t just check your credit score to determine whether they’ll lend.

Lenders will also assess the strength of your proposal and the income you earn, so a strong application can override serious credit problems with suitable lenders. Applicants with good credit will generally find it easier to gain approval but can be declined if the application lacks clarity.

A credit check is very easy for lenders to do, so it makes sense for them to carry this out as part of their assessment.

How can I improve my chances of getting a bridging loan?

You can improve your chances with the following:

  • Speak to an experienced bridging advisor
  • A strong exit plan
  • A suitable property
  • A sizeable deposit or adequate security
  • Your proposal must be viable
  • Experience in property investment

Bridging advisors

Speaking to an experienced advisor will greatly improve your chances of approval. This is because we’ll find lenders that are likely to say yes.

Approaching lenders at random is an almost certain way to be declined. Furthermore, being declined can affect your credit score. Using an advisor is crucial to improve your chances of getting a bridging loan.

Bad credit also has many variables that an advisor will have to assess before you can apply. Depending on the severity of your credit issues, some lenders may be unsuitable.

Your credit problems will also guide us to lenders who are likely to say yes. Downloading your credit file is a great place to start. You can then assess the severity of your credit issues and present them to your advisor to check the nature of your loan and calculate what’s possible.

Providing adequate security and an exit plan

You’ll also need to consider the security you’ll use for your bridging loan. This may be your own home or even an investment property.

Our advisors will check if the security is adequate for the loan you’re applying for. This will help to avoid any potential problems during your assessment.

Having your exit strategy prepared will also improve your chances of being approved. For instance, if you aim to sell a property to repay your bridging loan, the proceeds of the sale will need to be adequate.

Should I try to improve my credit score before applying?

There are ways to improve your credit score. That being said, it can take time for your credit score to show any improvements. Furthermore, lenders will still check your credit file. If you have a recent CCJ, for instance, lenders will see this on your credit file and may question your application.

Bridging loans are often used when purchases require fast turnarounds. For instance, you may buy at an auction and need finance to finalise the deal. In this situation, trying to improve your credit score beforehand is very unlikely.

Contact an expert

Once you’ve spoken to your advisor, we’ll inform you whether your application is likely to be accepted. In the worst-case scenario, we’ll guide you on improving your credit file for approval. This approach is better than applying and being declined.

If approved, repaying your bridging loan on time can help improve your credit score and help you secure further loans from the same lender.

Failing to repay the loan will further damage your credit file, so you must consider the risk involved. Your advisor will also assess your finances to ensure a bridging loan is the right option.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.