Ultimately, only you can decide whether or not you are an appropriate candidate for a bridging loan. If unsure, using an online bridging loan calculator to assess repayment suitability is the way to go. Explore the available options and determine whether or not you’re in a good position to apply, before going ahead with your application.
But what if you’re in the perfect financial position, yet your credit report says otherwise? You’ve every confidence in your capacity to repay the loan, but will your credit score affect your eligibility?
To a degree, the answer is yes – it probably will. This is because the vast majority of loans across the board typically involve a credit check. However, this doesn’t mean that poor credit will necessarily count you out of the running entirely. Particularly when it comes to more dynamic financial products like bridging loans, specialist lenders can be surprisingly flexible.
A Case of Collateral
Bridging loans are essentially secured loans like any other. The key difference being that with the bridging loan, the full balance of the loan and all additional borrowing costs are usually repaid in one lump sum after no more than a few months. The funds required are made available within a matter of days, using the borrower’s assets as collateral to secure the loan.
Those who prefer longer repayment periods can apply for bad credit mortgages as an alternative option, though mortgage applications typically take far longer to process.
What makes the biggest difference with bridging finance in general is the extent to which credit reports are considered inconsequential. Bridging finance specialists are primarily interested in the total value of the assets used to secure the loan – not the applicant’s financial history. If their assets comfortably cover the loan and all applicable borrowing costs, it’s considered a fundamentally ‘low risk’ loan on the part of the lender.
In the event that the borrower fails to keep up their end of the deal, ownership of the assets is transferred to the lender. After which, they can be sold, and the subsequent proceeds used to recoup their losses.
All of which may well make the whole credit rating system irrelevant in some ways.
Bridging Loans to Boost a Credit Score
Despite the fact that many bridging finance specialists don’t carry out credit checks, it’s still perfectly possible for a bridging loan to improve a borrower’s credit score. Assuming the applicant repays the loan in full and on time as agreed, it demonstrates their responsibility and is recorded on their credit file accordingly.
The opposite being true if they fail to keep up with their repayment obligations, but this is comparatively rare in the secured lending sphere.
Applying for Bridging Loans with Bad Credit
The interesting thing with bridging finance is that you aren’t limited to just a handful of options due to a poor credit score. Instead, the overwhelming majority of bridging finance specialists are more than happy to consider applicants with poor credit. Again, this is due to the fact that they’re far more interested in your assets than they are in your financial history.
In any case, it’s always advisable to take your business to a reputable broker. Working with an independent specialist can simplify the process of comparing as many deals as possible from an extensive panel of lenders across the UK. Some of which will be more or less interested in your credit report than others.
You could also improve your eligibility and gain access to a better deal in general by providing strong evidence of your current financial status. Along with proof of income, you’ll also want to provide information regarding your intended exit strategy. Roughly translated – how you intend to source the funds needed to repay the loan on the agreed date.
Just as long as you tick the most important boxes, you may find your imperfect credit history isn’t an issue when applying for a bridging loan.