Life often presents us with situations that require fast funding. In these moments, bridging loans have become a valuable tool.
However, like any finance option, getting a bridging loan isn't always easy, especially when you have a less than perfect credit history. Bad credit may cast doubt on your eligibility and leave you wondering whether you would be able to get this option.
In this blog, we explore whether you can get a bridging loan with bad credit, so you can see if it might be possible for you.
Can I get a bridging loan with bad credit?
Yes, it is possible, but the process might be harder. Having bad credit may worry lenders because it shows that you may struggle with managing your money and therefore might default on a loan.
However, with bridging loans, there may be a bit more flexibility. Lenders care more about how you plan to repay the loan (your exit strategy) and the property you are using as security.
With a clear exit strategy and a good property to secure the loan against, you may have a better chance of being accepted despite having bad credit. Whilst you may get accepted, it’s worth noting that you may get a higher interest rate.
If you’re struggling to manage your finances, it’s important for you to think carefully about whether this is a good idea. This is vital as if you default on your exit strategy, the property you have used as security could be repossessed.
Are bridging loans credit checked?
Yes, all loans involve a credit check. Lenders usually perform this as part of their assessment process to evaluate your financial background and creditworthiness.
It’s important to note that the decision isn't solely based on the credit score. Lenders also consider other factors such as your income, repayment history, and the purpose of the loan. Therefore, while a credit check is conducted, having a less-than-perfect credit score doesn't necessarily mean you won't be able to get accepted.
What if I am turned down for a bad credit bridging loan?
Facing a setback like being turned down for a loan can be discouraging, but, it's not necessarily the end of the journey. If you haven’t tried other lenders, it could be worth doing this to see if you may be successful elsewhere. Each lender has different criteria, so some may be more flexible than others may.
Alternatively, it could be worth seeing if you can boost your credit score before you apply. If you need the funding now this may not be possible, as it will take time to build up. However, its always an option if you can wait.
Eligibility for bad credit bridging loans
When you apply for a bridging loan with bad credit, certain things are taken into account to decide if you qualify. Lenders will have different requirements, but they usually consider the following:
Your security: Security in the form of a property is usually needed. The value of this property and the amount of equity you have in it will impact your loan amount.
Credit history: Lenders will assess your credit history, taking into account past credit problems', outstanding debts, and repayment trends. While a weak credit history might not stop you from getting accepted, it could impact the terms and interest rates you get.
Repayment strategy: Having a clear repayment plan is vital. Without having this mapped out, you are unlikely to get accepted.
Financial stability: Lenders also evaluate your financial stability by looking at your income and employment status to make sure you can meet loan terms.
Summary
In summary, getting a bridging loan with bad credit is possible, but the path might be more challenging. When you are applying, factors like property security, credit history, repayment strategy, and financial stability play key roles. Make sure you research your options carefully before you apply to ensure it is affordable and to help you find a provider that is likely to accept you.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
