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Home » Bridging Loans » Bridging Loan With Bad Credit
A bridging loan is a form of short-term finance used to secure property sales or raise funds for renovation work. Most property finance is designed for the long term and involves early repayment fees, but bridging loans are different.
Unlike a mortgage that takes weeks or even months to complete, a bridging loan can be set up much faster.
Bridging loans are also repaid at the end of the loan term, as opposed to being repaid through monthly repayments as with more common forms of finance. At the end of the term, the interest is rolled up and repaid with the outstanding loan balance – usually from the proceeds of a house sale.
You may still be eligible for a bridging loan even if you have poor credit but wish to secure a bridging loan for a property or project. You will first have to contact a specialist broker, like Sort Finance, who will advise you on what documents you need to arrange and prepare you for the application process. You need to be as open as possible about your financial situation with the adviser.
Your adviser will determine the likelihood of securing the bridging loan with bad credit and help you prepare the application. This will have to include a nominated property to secure the loan against and an exit plan. In the case of a new build or renovation, the property should sell soon after completion, which might be considered a satisfactory exit strategy.
The lender is concerned with the borrower’s credit rating with a mortgage. This happens because the loan is calculated over the long term, and individuals with poor credit histories are considered more likely to default on payments. To eliminate risk, mortgage lenders will often check credit scores.
For bridging finance, however, a lender might be less concerned with credit scores since the security of the loan is tied to a property (in contrast to unsecured loans), and the repayment depends on the exit strategy rather than regular repayments over time.
The short answer is that it could. A strong credit file may not be necessary for securing a bridging loan with bad credit, but if you successfully arrange one and repay it on schedule, it could improve your credit history.
You will not need a strong credit score to secure a bridging loan if you have a mortgage on a property; however, it will help you to be approved. You can improve your credit score by paying off your debts and credit cards on time using lines of credit wisely, always paying the full amount off on time, or making above-minimum payments.
All finance carries some risk both to the borrower and the lender. In the case of bad credit bridging loans, the risks increase, even if it is a bridging loan secured against a property. If you doubt your chances of securing a bridging loan or are unsure about the application details, it’s a good idea to contact a specialist adviser before making any commitments.
FCA disclaimer
Based on our research, the content contained on this website is accurate as of most recent time of writing. Lending criteria and policies may 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.
Some types of buy to let, commercial, bridging, mortgages are not regulated by the FCA.
Please think carefully before securing other debts against your home or releasing equity from a property you own. As a mortgage is generally secured against your home or your investment property, it may be repossessed if you do not keep up with repayments on your mortgage.
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