Do you need a bridging loan but have poor credit?
We are commonly asked whether bridging finance is available to individuals or companies with adverse credit scores.
In this article we’ll explore this topic, with the positive news being that there are many lenders who are flexible around imperfect corporate credit scoring.
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Why Credit Ratings are Not the Principle Lending Criteria for Bridging Finance
For traditional forms of finance such as mortgages, bank loans and credit cards, credit scoring plays an essential part in mapping out patterns of behaviour which may indicate higher risk.
With bridging finance, the lender is principally concerned with the security put up by the borrower, a non-negotiable requirement . Once this is in place, the lender has their own money protected since defaulting on repayments would give the lender right to force the sale of the security, as per the terms of the finance.
Since they are protected, bridging lenders can afford to be less concerned with overall credit history.
Are Credit Scores a Factor at All?
Bridging finance providers will still check the credit ratings of those who apply to borrow from then, as part of a wider risk assessment.
While each organisation will have slightly different practices in place, the basic method would be to use a credit scoring program to investigate recent activity, looking for signs of financial distress, late payment, excessive debt markets or other fiscal mismanagement.
Certain providers would consider this type of finding enough to refuse the bridging, while others would be very happy to offer the finance anyway. This is where a good finance broker such as ourselves can help, by sourcing the best deal for your situation.
Choosing Non-Status Bridging Loans with Bad Credit
While it is even possible to get a regular bridging loan with poor credit, another option for those in that situation is to choose a non-status loan.
Non-status bridging finance is the terminology for a loan where the lender is primarily considering the property deal as the impetus for the loan. Although all bridging is effectively non-status it has come to mean a particular type of product that delivers fast funding without the need for credit checks or income verification.
Can I Get a Bad Credit Bridging Loan Without Security?
The simple answer is no! You can't get any type of bridging loan without security, since this is what gives lenders the surety they are not going to lose their money.
Most lenders require property as security, though there are some which will accept other forms of collateral.
These properties are secured by a first, second or occasionally a third charge.
Using Guarantor Loans to Obtain Better Rates & Higher Limits
For those whose credit hampers their ability to to obtain competitive loan rates, one option is to use a guarantoor, a third party who signs on as a guarantor.
This guarantor assumes legal responsibility for the debt should the borrower refuse to pay.
Where the borrower has access to a family member or friend with enough trust in the venture to sign on for this, guarantor loans can be a useful option.
How Much can you Borrow on a Bridging Loan?
Generally speaking, most lenders won't lend more than 70-75% LTV, which means you need to have a deposit of 25% to 30% of the asset you're looking to purchase.
More than this is possible but you'll need to have cast iron security to use as loan collateral. Most lenders are perfectly comfortable with using multiple assets as collateral, too, assuming the total sum means their risk is measured appropriately.
Do You Need Help Finding Bridging Finance Despite a Poor Credit History?
Contact us now for free, immediate assistance sourcing the best deal for your situation. With over 40 years finance experience, and over 50 lenders at our disposal, we are here to help.