Do Bad Credit Bridging Loans Exist?

Learn what financing options you have available to you if you're someone with less than ideal credit history

Updated: January 7, 2024
Matt Crabtree

Written By

Matt Crabtree

 

Generally speaking, pretty much everyone in the United Kingdom is going to hear alarm bells when they hear the phrase “bad credit” — particularly when you're trying to apply for a loan with a bad credit history.

Having said that, unfortunately, adverse credit is actually a lot more common than you might expect, so whether it was due to financial missteps that you made in the past or even just unforeseen circumstances that you could never have planned for, chances are you'll have a lot less financing options when it comes to traditional loans if you can relate to this.

Still, if you find yourself in a less than ideal credit situation, you're not totally without hope — there are still a few loan options out there, like bridging loans designed specifically for people with poor credit history.

So, throughout this article, we'll be taking a closer look at all you need to know about bridging loans — covering things like how feasibly you can apply for one and which kind of person is best suited for one of these loans.

Understanding Bridging Loans

Before we go any further, it's worth providing a bit of background information so you've got an understanding of how an adverse credit bridging loan actually works:

The Fundamentals of Bridging Loans

Bridging loans, which you might also hear referred to as “bridging finance”, might sound a little more complicated than what they actually are, but in reality, it's just another financial instrument that you can use in order to bridge some kind of financial gap you might have in your life — whether that's something to do with your personal life or it's related a business that you own and need funding for.

Now, there is obviously no shortage of options when it comes to applying for a loan in the United Kingdom, so what exactly makes bad credit bridging finance so special?

Let's explore some distinctions between these loans and conventional financing options in the next section of the article:

Versatility of Application

Firstly, one of the main things that sets bridging loans apart from other loans is the versatility that they come with.

Generally speaking, you'll find that a lot of traditional loans tend to have pretty strict application purposes, meaning you're only ever able to secure one if the lender deems you to have a specific enough reason for the money.

Obviously, this is a more secure way of going about the loan agreement as far as the lender is concerned, but for the person receiving the loan, you're now fairly limited to what you can spend the money on.

On the other hand, bridging loans can be applied in a bunch of different scenarios — whether it's so you can purchase a new property before you sell your existing one, acquire an auction property, or even just address any time-sensitive business needs that you might've had.

Naturally, this gives them a lot more flexibility, as you have a lot more control over how you wish to apply for the loan.

Speed of Approval and Disbursement

Again, what makes bridging loans so effective is how fast they're able to get you out of financial hardship, providing a quick cash injection whether you require a bit of money before your payday or you're a company owner who has impatient suppliers needing to be paid.

As you'll find with a lot of traditional loans out there, you're often going to have to wait a decent amount of time for your application to be approved — that is, if it's actually accepted. Naturally, this isn't helpful at all if you need the money urgently, so it's a huge plus that the bridging loan application process is fairly renowned for being swift when it comes to approval and disbursement of the funds.

As such, this makes them a way better option for anyone who has to take immediate financial action, whatever your reason.

How Do Bridging Loans Work?

Generally speaking, you'd never want to solely rely on a bridging loan since they're mainly designed to work on an interim basis — giving you a quick financing lifeline until you're hopefully able to quickly find a permanent financial solution like a mortgage or the sale of an asset is secured.

So, they're only really meant for a short term basis, and this is usually around a few weeks to a few months. Crucially, though, these are a secured kind of loan, which means involving your own against property or any other kind of valuable asset.

Secured Against Assets

Though you can find plenty of unsecured options when it comes to things like payday loans, bridging loans work slightly differently since they're secured against valuable assets (which, in most cases, tend to be property).

Now, there are actually several reasons why this kind of loan requires some form of collateral in order to obtain it, but let's start with the fact that it mitigates a lot of the risk that's involved with the poor credit rating most lenders apply with.

Put simply, any bridging lender or loan provider, in general, would be taking on far more risk than is worthwhile to them if they decide to give an unsecured loan to someone with an exceptionally bad credit rating since their score would tell you that the terms of the agreement might not be met.

So, now that the collateral provides some level of assurance that the lender's criteria will be met, you'll be able to obtain much more favourable credit terms.

Aside from this, it also just gives anyone with an adverse credit rating a great opportunity to shift their focus from their credit history and explore whether they might have any valuable assets to provide as collateral — opening yet another possible avenue for financial assistance should you need it.

The Conundrum of Adverse Credit

We've talked quite a lot so far about general background information to do with these kinds of loans and what sets them apart from other options, but factoring in your credit score if you're planning on applying for one is a completely separate task.

The Stigma of Bad Credit

Unfortunately, aside from not being able to apply for the vast majority of loans or credit cards that are available, there are even more consequences that can come with having a less than ideal credit score.

For instance, it can definitely have an influence on things such as employment opportunities and insurance premiums, but even things like rental applications, too, given that you may be deemed unlikely to receive your deposit back for whatever reason.

Ultimately, you're going to have a firm understanding of how you've managed to obtain such an adverse credit rating in the first place if you ever want to rebuild some level of financial stability.

The Emergence of Bad Credit Bridging Loans

So, to wrap up, it's fairly clear how bridging loans can be a pretty positive way of dealing with your poor credit rating if this is something you currently suffer with.

Given that traditional lenders usually aren't so generous when it comes to giving out loans unless your credit rating is perfect, the bad credit bridging lenders are far more interested in the value of the collateral that you are providing and what your exit strategy is — giving you a massive lifeline for if you're ever in need of immediate financial support.

Still, for all we've talked positively about these kinds of loans throughout the article, it's definitely still worth acknowledging that they can often come with much higher interest rates in relation to more traditional financing options, but this should be expected given the increased perceived risk for the lender.

Related Guides:

Do Bad Credit Bridging Loans Exist: FAQs

Can Bad Credit Bridging Loans Serve As An Alternative To Payday Loans For Those With Poor Credit Histories?

How Can One Improve Their Chances of Approval For a Bad Credit Bridging Loan?

Can Bad Credit Bridging Loans Be Used For Both Residential and Commercial Purposes?

Are There Specific Industries or Sectors That Bad Credit Bridging Loans Cater To More Than Others?

Can Bad Credit Bridging Loans Be Used To Consolidate Existing Debts With High-Interest Rates?

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