When it comes to any kind of property loan, bad credit can always be a concern. Whether it be a mortgage, construction loan or bridging loan, your credit history can be a huge potential roadblock to obtaining the funds that you need.
The reality of the property market is that credit scores and credit history can hugely damage your eligibility for loans. In fact, more than 1 in 5 mortgage applications are denied a year due to poor credit.
However, not all hope is lost. Many different reputable lenders specialise in providing loans for individuals with bad credit. So if you are worried about your credit history whilst looking for a bridging loan, worry not.
In this article, we will take a look at what exactly bridging loans are, their typical eligibility requirements, the relationship between poor credit and bridging loans as well as how you can obtain bridging loans with poor credit.
What Is A Bridging Loan?
A bridging loan is a short-term loan that is typically used in purchasing properties. The loan is designed to bridge the financial gap to meet tight timeframes whilst waiting for the sale of the current property to go through.
As these loans are supposed to be short-term solutions, they tend to come with higher interest rates than other property loans such as mortgages. They are a very popular type of loan thanks to their incredible flexibility and relatively simple application process.
What Can You Use Bridging Loans For?
There are several different reasons why individuals need to access finances through bridging loans. The main reason that most people resort to bridging finance is time. There are no loans that provide you with the capital you need as quickly as bridging loans. The main ways that you can use bridging loans are:
- Purchasing a new property - If you are under time constraints when purchasing a property but your current house has not sold, bridging loans are perfect. They offer you all of the capital that you need quickly and you can repay the loan as soon as your house sells.
- Breaking mortgage chain - A mortgage chain can significantly delay the purchase of a house and can therefore affect your attractiveness to a seller. By using bridging loans you can ensure that you have the finances to break a chain and become more favourable for estate agents and sellers.
- Purchasing Investment Properties - Bridging loans helps landlords and investors buy new investment properties that offset good returns very quickly. Having the disposable funds through bridging finance can ensure that you can agree on a sale of the home quicker than other property investors.
- Auction Property Purchases - Auctions give buyers the best value for money opportunities. However, they require payment within 28 days of winning the auction which is not enough time to arrange a mortgage. Bridging loans helps give the buyer the funds to purchase the property whilst arranging the long-term financials.
Bridging Loan Eligibility Criteria
Eligibility criteria for bridging loans are not universal across the whole industry, while all are relatively similar, each lender typically has their own more specific criteria. The only criteria that remains the same across all lenders is that the applicant must be over 18 years of age.
The other common eligibility requirements include more in-depth information such as repayment strategies, length of loan term, property type, deposit size, proof of income, and so much more. These terms help the lender to better understand why you need the loan and also how you intend to repay the loan.
Another criterion that many, but not all, bridging loan lenders have is good credit. This means that they will look out for things such as CCJs (county court judgements), defaults, repossessions, bankruptcy etc. The worse your credit history, the more of a risk you will be seen as by the lender.
How Important Is Your Credit Score When It Comes To Applying For Bridging Loans?
As with any loan, your credit score and credit history are extremely important for bridging finance loans. Poor credit history means that lenders will see you as far more of a risk than an applicant with a clean credit history. While this is a very hard pill to swallow for many with bad credit, it is the reality of looking to take out a loan.
However, bad credit in no way means that you cannot take out a bridging loan. It simply means that you will have to find the right lender that specialises in bridging loans for individuals with poor credit.
There is a huge variety of lenders that specialise in bad credit bridging loans. These are bridging loans that make it far easier for individuals with poor credit and credit history to obtain the loans that they need. However, you should expect these loans to come with higher interest rates to help mitigate the risks for the lender.
How To Get Bridging Loans With Bad Credit
The process of obtaining a bridging loan with bad credit will undoubtedly be more difficult than obtaining a loan with good credit. However, many advisors can help you through the process and make it that much easier.
- Do your research - As the process of getting bridging loans with poor credit is tough, you must do your homework. Choosing a reputable lender that specialises in poor credit is essential to making the process as easy as possible. They can also help you to put your mind at ease throughout the process.
- Prepare your documents - When applying for any bridging loan, poor credit or not, it is hugely important to have the relevant documents such as proof of identity, address, income and also bank statements. These documents will all be essential for proving your current financial stability. These are even more important if you have a poor history with credit.
- Know your credit vulnerabilities - Knowing your vulnerabilities when it comes to your credit score is the best way to address any discrepancies. This will also help you to be in a stronger position to build an argument for loan repayments.
- Work with specialists - Working with specialist lenders such as TIC Finance that specialise in bridging loans for bad credit is essential. Not only will it make to process much simpler but it will increase your chances of a successful application.
Fast & Reliable Poor Credit Bridging Loans From TIC Finance
Here at TIC Finance, we offer short-term bridging loans from 3 – 12 months with funding arranged within 72 hours of your application. Do you have a poor credit history? Worry not, we provide our fast and reliable bridging loans to individuals with bad credit to help them get on the property ladder, purchase a new home or even stop repossessions.
