At Goldhill Finance Limted we understand how people might feel when time is critical and all of the traditional lenders have said no. Finding the finance that you need can feel like an uphill battle, especially for those who have a less than perfect credit history. This is where a bridging loan can step in and solve your problems! They offer you a short-term option that can be made accessible to those who don’t have the best credit history.
By reading this blog post you will find out how a bad credit bridging loan works, who they’re suitable for, and all the things you might want to consider before you apply. To help you even more we will also provide you with a real-world example.
So, what is a bridging loan?
Describing a bridging loan is easy. They are a short-term, property-backed loan that’s been designed to cover any temporary funding gaps.
They’re commonly used when speed is the most important aspect, such as purchasing a property before yours has sold, buying at auction, or funding a refurbishment project prior to its refinancing.
Bridging finance focuses less on any historic credit issues you may have and more on:
- The value and condition of the property
- The loan-to-value (LTV)
- You having a clear and realistic exit strategy
How easy it getting a bridging loan with bad credit?
As we have already mentioned, one of the key advantages of bridging finance is the flexibility it offers when it comes to credit history. There are many specialist lenders, including Goldhill Finance Limited who are more than happy to consider applications from borrowers with:
- County Court Judgements (CCJs)
- Missed or late payments
- Defaults
- Individual Voluntary Arrangements (IVAs)
- Previously discharged bankruptcies
Unlike a traditional loan/mortgage, we don’t rely simply on automated credit scoring, the emphasis is instead placed on the strength of the security offered and how your loan will be repaid.
Although adverse credit can affect pricing, it does not automatically prevent access to funding.
Why bridging finance works when credit is an issue
Most high-street lenders have rigid “set in stone” criteria, particularly when it comes to income verification and credit scores. We as bridging lenders operate differently.
We are primarily concerned with the following factors:
- How quick can the loan can be repaid?
- Has the property provided seen as sufficient security?
- Is the borrower’s exit route feasible?
Because of these points bridging finance works as a viable solution for investors, developers, landlords and homeowners who are looking for short-term funding who may not fit the conventional lending criteria.
Common uses for bad credit bridging loans
Borrowers often use bridging finance for the following reasons:
- To purchase a property at auction which may come with tight completion deadlines
- Buying a new property before selling your existing property
- Refurbishment or light development projects
- Refinancing a bridging loan that already exists
- Releasing capital from property for business or investment purposes
When we look at your bridging loan application as long as there is a clear plan in place to repay the loan, we don’t think that bad credit does has to stand in the way.
Costs, terms and repayment
As discussed earlier, bridging loans have been designed to be short term, they typically range from 1 to 12 months, although longer terms can sometimes be considered (up to 24 months with a payment plan in place).
Costs usually include:
- Monthly interest (This is usually rolled up and paid at the end of the loan)
- Arrangement and legal fees
- Valuation costs
The Interest rates are higher on bridging loans than for standard mortgages, however, this reflects the speed, flexibility and short duration of the loan.
For borrowers with poor credit, the rates you get may be slightly higher, but providing strong security and a solid exit strategy can help to keep the costs as competitive as possible.
Understanding the risks
As a bridging loan is secured against property, it’s essential to plan carefully before you apply. Some of the main risks include:
- Delays to selling or refinancing can increase interest costs
- Any additional fees if the loan term needs extending
- Potential risk (such as a repossession) to the property if the loan cannot be repaid
By working with an experienced lender who always makes sure to assess affordability and exit strategies thoroughly can significantly reduce any of the above risks.
Bad credit bridging loans FAQs
Can you get bridging finance with bad credit?
Yes. Lenders prioritise the property and exit strategy over any historic credit issues.
How quickly can a bridging loan be arranged?
In most cases, the funds you need can be approved within 2 hours and released to you within 48 hours, this makes bridging finance the perfect solution for any time-sensitive situations.
How much am I able to borrow?
Most bridging loans are offered at up to 60 – 75% loan-to-value, this depends on the property type, your credit profile and the exit plan you have provided us with. At Goldhill Finance Limited we can offer loans starting from £10,000.
What types of properties are acceptable?
The following properties are all commonly accepted:
- Residential
- Commercial
- Mixed-use properties
This list also includes properties that require refurbishment, as long as they provide adequate security.
Can my loan term be extended?
Yes, an extensions is possible, however, additional interest and fees may be applied. Early communication with the finance lender is always the most important factor.
Case studies: Goldhill Finance in action
Case study 1: Auction purchase despite CCJs
Client: Property investor, aged 42
Situation: Multiple historic CCJs, purchased at an that requires completion within 28 days
The client approached Goldhill Finance after they were declined by mainstream lenders. Although they had adverse credit history, the property that they offered as security had strong resale potential and the client had a clear refurbishment and sale strategy, leading to an exit that looked strong.
We provided the client with a £180,000 bridging loan which was secured against the property, this allowed the client to complete the purchase on time. After eight months of renovations and the sale period, the loan was repaid in full. This sale allowed the investor to move on to their next project and also reap the rewards of his profit.
Case study 2: Bridging a home purchase with an IVA
Client: Homeowner, aged 35
Situation: Active IVA, purchasing a new home before the property he currently lives in has been sold
The client needed a short-term funding option to avoid losing their dream new home. The traditional mortgage option was not available to the client due to her IVA.
We arranged a £220,000 bridging loan that was secured against her existing property. This allowed her to complete the purchase of her new home without delay. Four months later, her original property sold and the bridging loan was repaid smoothly.
Why choose Goldhill Finance?
At Goldhill Finance Limited we are a specialist direct lender that focuses on the speed in which we can both accept and provide your loan, transparency and tailored solutions designed to meet every need. There is no “one-size-fits-all” approach; every application we receive is assessed on the individual merits that come with it.
If you are a borrower with bad credit, Goldhill Finance offers:
- Fast decision-making (often providing approvals in 2 hours and funding within 48)
- Flexible underwriting
- A focus on property value and the exit strategy you have in place
If you are in need of short-term funding and don’t have a perfect credit history, get in touch with us today as we believe that bridging finance can offer you a practical way forward.