How to Get a Bridging Loan with Bad Credit

Need a bridge loan but don’t have the best credit? Discover what the options are for a bridge loan with bad credit.

You’ve found the perfect home—it has an open floor plan, plenty of natural light, and the exact clawfoot bathtub and matching vanity that you had pinned to your dream house dream board. The only thing missing? The proper financing. 

If you’re ready to buy a home, but still haven’t sold your current home, you may be a little low on funds. A bridging loan can be a great short-term solution for home buyers looking for some extra financing who are unable to quickly acquire long-term financing.

But, for those with below-average credit, accessing a bridging finance option is increasingly difficult. Below, you’ll learn more about bridge financing and other financing alternatives for homeowners with poor credit.

Attaining a Bridging Loan 

Bridging loans, also known as bridge loans, swing loans, or gap financing, are short-term loans designed to essentially bridge the gap between two properties when financing is not yet available, but eventually will be.

In other words, bridging loans are the lifevest while you wait for the rescue boat to arrive. 

These loans are commonly used in real estate to help individuals use the equity in the home that they plan to sell to make a down payment on their newly purchased home. 

Generally, home buyers can borrow up to 80% of the equity they have in their current home. 

As with other kinds of loans, a bridging loan lender will assess a potential borrower’s risk through several factors, examining credit score, loan history, income, assets, education, and more to determine how likely the borrower is to pay back the loan. Typically, a bridge loan is good for six to 12 months. 

Can You Get a Bridging Loan with Bad Credit?

Many Americans face financial difficulties, especially during times of transition, salary cuts, or medical expenses. As such, a few rough patches can very quickly lead to a below-average credit score which can make it difficult to access home equity with bad credit.

When considering whether you can obtain a bridging loan, bad credit history is a huge factor. And whether you can obtain one is largely dependent on the individual lender. 

It can be very difficult to find a lender who will take on the liability of a sub-prime borrower—someone who’s considered high risk by lenders due to their low credit score and poor payment history. 

While some lenders do offer less risky loans, such as personal loans, to individuals with a poor credit score, bridge loans are harder for those with poor credit history to obtain due to their high interest rates and high-risk profile. 

Bridging Loan Criteria

Lenders who do offer bad credit bridging loans will be looking for responsible individuals who can pay back the loan fully and in a timely manner. During the analysis, lenders will look at a variety of factors, including:

• Your equity in your property
• Your income
• Your debt-to-income ratio

If you’re looking to improve your chances of attaining a bridge loan, consider:

• Providing a detailed financial history that explains anything that may have negatively impacted your credit score. Bad credit doesn’t always result from bad decisions, but your lender will need to see that in order to deem you trustworthy.
• Preparing an action plan that shows the lenders how you plan to use the loan responsibly and how you plan to pay back the loan on time. In other words, show them how you will successfully bridge the gap.

Key Takeaways

Need a bridge loan but don’t have the best credit? Discover what the options are for a bridge loan with bad credit. If you are still unsure of how to obtain a bridge loan, after reading this article, consult a financial advisor to discuss your options.