Yes, You Can Get A Bridging Loan With Bad Credit

Many people believe they will get rejected for a loan if they have a poor credit history. It's true that for personal loans, credit cards, and mortgage applications, you may well be turned down.

But you may get approval for a bridging loan with bad credit.

In this guide, find out why some bridging lenders may be willing to approve a short-term bridging loan, whether applying for bridging finance affects your credit score, and how to get a bridging loan with adverse credit.

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Key Takeaways

• Bad credit doesn't automatically disqualify you from obtaining a bridging loan. A lot of lenders prioritise a strong exit strategy over credit history
• A larger deposit, or more equity in the property used as security, can reduce your loan-to-value ratio and may improve the options available to you
• Bridging lenders typically place more emphasis on a viable exit strategy, such as property sale or refinancing, and securing the loan against an asset

Table of Contents

Why You Can Still Apply For a Bridging Loan with Bad Credit

A poor credit score is not always a reflection of your current situation.  

People can fall into bad credit for all sorts of reasons and it's perfectly possible to be in a situation where you're earning a good and stable income, but your previous credit rating affects your ability to borrow.

Your credit score can take time to rectify, but that doesn't mean that you aren't in a good position to take out a loan now and be more than capable of repaying it responsibly. Particularly if you own property and have built up a reasonable amount of equity.

Bridge Lending Criteria Are Different: Here's Why

• The property provides security: Bridging finance is secured against property. Its value, the equity available, and any existing secured borrowing help determine how much a lender may be willing to offer
• Your exit strategy explains how you will repay: You need a credible plan to repay the bridging loan, such as selling a property or refinancing onto a mortgage. The lender will assess whether that plan is realistic within the agreed loan term

With these two key factors underpinning the lending criteria, bad credit bridging loans are possible.

Our expert bridging loan brokers can look at your situation and help you determine whether your circumstances and repayment strategy are viable.

Which Credit Issues Will Some Bridging Lenders Overlook?

Adverse credit does not automatically rule out a bridging loan, but acceptance depends on the lender and the nature, age, and severity of the credit issues.

Credit checks may still be required, and unresolved problems can affect approval, pricing, or the proposed refinance exit.

Bad credit is less likely to impact a lender's approval of a bridging loan if your exit strategy is the sale of a property.

Where repayment is planned from a property sale, the lender will assess whether the expected proceeds can cover the bridging loan, other secured borrowing, interest, and costs within the agreed term. A sale-based exit does not completely remove credit checks or the lender’s other assessment requirements.

If your history of bad credit does not directly affect your exit strategy, some lenders may be willing to look beyond the following common issues:

• A low credit score
• No credit history
• Late payments
• Missed mortgage payments
• Payment defaults
• CCJs
• IVAs
• Debt management Schemes
• Payday Loans
• Repossessions
• Bankruptcy

Please note: This is not a list of automatically acceptable circumstances. Tell your broker if and when each issue occurred, whether debts remain outstanding, whether an IVA is ongoing or completed, and whether any bankruptcy has been discharged. The relevant lender’s criteria will need to be checked.

If your exit strategy is to refinance a property onto a mortgage product, bad credit history can still raise concern for lenders.

Where repayment depends on a new mortgage, you need a realistic route to qualifying for that mortgage. Your credit history, the property, the amount required, and any applicable income or affordability criteria will affect whether refinancing is achievable.

However, there are a number of specialist bridging lenders who are experienced in dealing with adverse credit borrowers, so it's worth talking to one of our specialist advisors to find out what your options are.

Non-Standard Exit Strategy for a Bridging Loan

It's worth mentioning that if bad credit is preventing you from arranging mortgage finance to repay a bridging loan, we may be able to find specialist lenders who will accept non-standard exit proposals.

These may include funds you will have access to in the future such as receiving an inheritance or cashing in investments.

You will need to speak to a bridging loan broker to explore whether a non-standard exit strategy is acceptable in your specific circumstances.

Will Applying for a Bridging Loan Affect My Credit History?

Applying for bridging finance can affect your credit score, depending on the checks carried out by the lender.

• Initial assessment: Some bridging lenders use a soft credit search when assessing an enquiry. A soft search does not affect your credit score, but the process varies between lenders
• Application checks: A hard credit search may be required as your application progresses. This is recorded on your credit report and is visible to other lenders. It can affect your credit score, particularly if several hard searches take place within a short period

Bridging lenders consider the property offered as security, the loan-to-value ratio, and how you intend to repay, alongside your credit history.

Previous credit problems do not necessarily prevent borrowing, but lenders still assess your financial circumstances and whether the application meets their criteria. Having sufficient property equity does not guarantee approval.

If you intend to repay the bridge by taking out a mortgage, your ability to qualify for that mortgage also needs to be considered. Income evidence may be required where you are making monthly interest payments or relying on refinancing to repay the loan.

Speak to one of our bridging specialists about your credit history and repayment plans before submitting applications, and ask them to explain the proposed lender’s credit checks.

Try Our Free Bridging Loan Calculator

Use our free bridging loan calculator to explore an illustrative borrowing cost.

It does not assess your credit history or confirm eligibility, and the terms available for your circumstances may differ.

What Is a Bridging Loan?

A bridging loan is loan secured against property, usually used to buy another property in the short term (typically 12 month terms). They are secured against an asset, usually a property you already own. 

Crucially, the loan is agreed upon with a clear exit strategy in place - usually through the sale of a property which enables you to pay back the loan in full, or by refinancing the property you've bought with a mortgage, for example.

The point being is that your exit strategy is the key factor that a bridging lender will look at.

They're often used when someone is buying a new house but haven't yet sold their existing house. A bridging loan fills the gap so that the property transactions can go through, typically in chain break or downsizing scenarios.

They can also be used to fund property refurbishment or home improvement projects to increase the value of a property sell, to finance an auction property purchase, or for many other property financing scenarios.

Bridging loan interest rates are commonly quoted as a monthly rate. Depending on the product, interest may be paid monthly, retained upfront, or rolled up into the loan. Check the interest arrangement and all applicable fees when comparing the total cost.

You may be able to repay a bridging loan before its agreed end date. Some lenders permit early repayment without an early repayment charge but still require a minimum amount of interest.

What Are the Other Requirements I Have to Meet to Get a Bridging Loan?

If you are applying for a bridging loan and have bad credit, you will be in a stronger position if you can meet the following requirements:

• A feasible exit strategy, as discussed above, typically achieved by the sale of a property or refinancing onto a mortgage product. Alternative exit proposals may be considered
• Property that is acceptable to the lender as security. Its condition, valuation and saleability will be assessed. Where work is needed before a mortgage can be arranged, the refurbishment plan and proposed exit also matter
• Sufficient deposit or equity for the proposed loan. Requirements depend on the lender, property, credit history, and repayment plan; a larger contribution may improve the options available
• A strong business plan if you are a property developer (flip to sell a residential property or commercial development)
• If you're applying for a property development bridging loan, lenders may want to see relevant experience and evidence of project capability in order to consider your application

Bridging loan lenders always look at an application on a case-by-case basis.

If you have a history of poor credit, it's always best to speak with a specialist bridging broker who will put you in touch with the lender who is most likely to approve your situation.

Can I Get a Bridge-to-Let Loan with Bad Credit?

It may be possible to use bridging finance to purchase or improve a rental property before refinancing onto a buy-to-let mortgage. This is known as a bridge-to-let agreement.

However, acceptance for the bridging loan does not automatically mean you will qualify for the longer-term mortgage.

Your broker should assess the proposed buy-to-let exit before you commit to the bridge, including:

• The lender’s credit criteria
• The property’s suitability
• The expected rental income

The evidence required to support that exit will depend on the lenders and products involved.

A decision in principle can help indicate whether the proposed mortgage may be available, but it is not a guaranteed mortgage offer. Further checks and conditions will still apply.

How to Get a Bridging Loan With Bad Credit

If you're hoping to get a bridging loan and you have bad credit, the first thing to do is speak to one of our bridging loan experts here at Clifton Private Finance.

Get a Bridging Loan Quote

Complete the simple form to receive tailored bridging finance options.

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Our team have specialist knowledge of the loan market with access to niche lenders you won't be able to approach yourself.

They'll get a full understanding of your circumstances, give you expert advice on whether your application is viable, and help you with all the documentation and information a lender will require.

After an initial assessment, we can approach suitable lenders for an indicative decision. Timescales depend on the lender, the complexity of your circumstances and the information available. A decision in principle is not a formal loan offer.

To see what we can do for you give us a call at 0117 332 5059 or book a free consultation below.