Attempting to secure a loan when your credit history is a bit patchy can feel like you're constantly running into dead ends. We understand the frustration all too well. Through our investigation, we've uncovered effective methods for obtaining bad credit bridging finance.
Carry on reading to discover how these strategies can work for you as well.
Key Takeaways
- Bridging finance is a short-term loan, using property as security. People use it for quick cash needs. It has grown fast since 2010.
- Bad credit doesn't stop us from getting bridging loans. We might need a large deposit, like 25% or more. Paying back on time can even improve our credit score.
- Find lenders who understand bad credit situations. Specialised firms and brokers can help us better than regular banks.
- Preparing well helps get the loan. This means showing we have enough money for the deposit and a plan to pay back the loan.
- Using something valuable as collateral makes it easier to get the loan and might lower interest rates. Talking to an experienced broker can guide us through this process.
What is Bridging Finance?
Bridging finance is like a quick loan we can get by using property as a promise to pay back. We usually take it for about 12 months or less. With this type of loan, every month we must pay interest based on how much money we borrowed until we can return the whole amount.
People often use bridging loans for fast buying of houses, fixing up properties, getting out of tough spots in property chains, or grabbing business chances.
The bridging finance world has grown big and fast. Since 2010, its value shot up to more than £5 billion. Getting money through these loans now happens way faster than before—usually in under 60 days—thanks to better technology that helps speed up checking the value of properties and filling out paperwork.
Now let's explore why bad credit makes it harder but not impossible to get this kind of finance.
Understanding Bad Credit and Its Impact on Finance
Bad credit can make us feel locked out of finance options. It's like a shadow on our financial history, telling lenders we've had troubles in the past. But it doesn't show the whole picture.
Many of us with bad credit actually have stable incomes now and are fully able to pay back new loans. Yet, this stigma sticks.
Getting money through bridging finance could be tougher for us because of our past mistakes – things like late payments or defaults that have left marks on our credit histories. We might need to put down a larger deposit, sometimes about 25%, just to get considered by lenders.
And those scary sounding terms - county court judgements (CCJs), they add weight to the challenge too.
But here’s some good news: applying for bridging loans doesn't hurt our credit scores more, as long as we stick to repayment plans. Even better, repaying a bridging loan on time can actually help fix our credit ratings over time, showing new lenders that we're back on track.
Steps to Secure Bad Credit Bridging Finance
Securing bad credit bridging finance involves a smart approach - evaluating your finances, finding the right lenders, prepping your documents, and maybe using a guarantor. Keen to learn how? Keep reading for more insights!
Evaluate your financial situation
We need to check our financial situation well. First, we look at how much money we have and how much we owe. We see what we own and what we need to pay back. It's good to know the value of things like our house or car.
Next, we figure out if we can put down a big deposit for the loan, maybe 40% or more. This helps us get the loan easier.
We also make a plan for paying back the money. If it's for business, a strong plan shows how the business will make enough money to cover the loan. Plus, we think about extra costs that come with bridging loans - things like fees for setting everything up and legal stuff.
Research specialised lenders
After we have looked at our finances, the next step is to find the right lenders. We go for those who know about bad credit bridging loans. Firms like Revolution Brokers help people with different credit issues.
They don't just look at your credit score; they look at everything.
These lenders are great because they check each case by itself. They have rules that are easy to work with, not hard like regular banks. Also, talking to a broker makes this step easier.
They can show us which lenders will listen and perhaps say yes to our loan request.
Prepare necessary documentation
We need to get all our papers ready. This means pulling together documents that show we can pay back the loan. We make sure our property is in good shape, as this helps a lot. A big part of this is showing we have enough money for a large deposit, about 25% or more.
This makes lenders more comfortable.
Next, we talk to a lender or broker early. They tell us exactly what papers we need. This could be proof of income or plans for how we'll use the money and pay it back. We also explain clearly how we'll repay everything at the end of the term.
Putting these steps into action makes it easier for us to secure bridging finance even with bad credit. It shows lenders that we're serious and have thought things through carefully.
Consider a guarantor or collateral
A guarantor or collateral makes a big difference for us when we need a bridging loan but have bad credit. For example, one client's dad put his house up as collateral. This made the loan application much stronger.
It meant the lender saw less risk and was more willing to lend money.
Using a house or something valuable as collateral also helps lower the loan-to-value (LTV) ratio. If we get this under 55%, it's really good for getting lower interest rates on the loan.
A low LTV tells lenders we're not asking for too much compared to what we're offering as security, so they feel safer lending us money.
We always say talking to an experienced broker is smart if using a guarantor or putting up collateral feels tricky. They know how to handle these situations and can guide us through making our application better, which means there's a higher chance of getting that bridging finance we need—even with bad credit in play.
Benefits of Bad Credit Bridging Finance
Getting bad credit bridging finance can open doors quickly to much-needed funds. It lets people with less-than-perfect credit enjoy flexible ways to pay back the loan.
Quick access to funds
We all know how tough it can be to get money fast, especially with bad credit. That's where bridging finance comes in handy. It helps us grab the funds we need quickly without waiting ages.
This means we can cover urgent costs or snap up deals that won't wait around for us.
Next, let's look at flexible repayment terms that come along with these loans...
Flexible repayment terms
We've found that one of the big pluses of bad credit bridging finance is the flexible repayment terms. This flexibility means you don't have to worry about monthly repayments because the interest can be added to the loan amount instead.
It's a relief, really, especially when cash flow is tight. Loans last up to 18 months normally. But if it's secured against your home, this goes down to 12 months.
Rates vary from 0.45% to 1.75% per month which gives some room to find a deal that suits your budget best. Having options like these makes planning much easier for us all.
Now let's talk about how quick you can get your hands on the funds...
Tips for Improving Approval Chances
Boosting your chances of getting a bad credit bridging loan is all about showing you can handle it. Working with an expert and laying out a solid plan for paying the loan back are good steps.
Work with an experienced broker
We always say getting help from a specialised broker makes things easier. These experts know all about bad credit bridging finance. They can find better loan terms for us. We works with these skilled brokers.
This way, we have a higher chance of getting our mortgage approved. Our expert brokers have helped many clients in tough credit situations.
There are no fees to worry about, and it won't hurt our credit score either. People share stories of how these brokers turned their luck around with loans. It's because they really understand how to deal with bad credit.
Demonstrate a clear repayment strategy
After finding a good broker, it's time to show we can pay back the loan. We need to have a solid plan ready. This means telling the lender how and when we'll pay them back. We make sure this plan is very clear.
We talk about our plans and timelines for repayment.
Keeping in touch with the lender is key to avoid problems. If anything changes with our money situation, we tell them right away. This helps keep everything smooth and improves our chance of getting approved.
Conclusion
Getting a bad credit bridging loan might seem hard, but it's possible. We can look for lenders who help people like us. Together, we prepare our papers and might even use something valuable as security.
This way, we get fast money to use short-term. If we pick the right help and show how we'll pay back, getting the loan becomes easier.
