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Adverse Credit Lending

Overview of Adverse Credit Lending

What Is Adverse Credit Lending?

Adverse credit is fairly common in the UK and can seriously affect one’s ability to access debt, especially when it comes to mortgages. While accessing finance with adverse credit can be tricky, it is certainly not impossible. There are a number of lenders who lend to, and even seek out, borrowers with adverse credit.
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When Is Adverse Credit Finance Required?

Adverse credit finance is required where a borrower has experienced instances of poor credit; these may range from CCJs, IVAs, defaults, or even bankruptcies. Borrowers with these instances of poor credit will likely find it difficult to source traditional finance and will have to source adverse credit finance.

Who Typically Needs This Type of Finance?

Adverse credit finance is available to a range of different borrowers, but given that it comes at a higher cost than traditional finance, it is better suited to those who have already tried to access finance through traditional lenders.

How Silver Oak Capital Assists Clients with Adverse Credit Lending

Understanding Your Circumstances
and Objective

When assisting clients with adverse credit, it is important to know which lenders to approach and how to approach them. It is important for us to understand the circumstances that led to the poor credit, as this will likely be scrutinised by the lender. In addition to this, lenders will want to see that the borrower will be in a better position after the finance has been lent, and it is important that we demonstrate this to the lender.

Presenting Your Case Effectively
to Specialist Lenders

When presenting the case to lenders, it is important to paint a clear picture of the situation from day one. This will ensure that there are no setbacks later in the process.

Negotiating Competitive Terms on
Your Behalf

Having a skilled mortgage broker by your side is important to ensure that you are accessing the most competitive terms. Skilled mortgage brokers are able to leverage their years of experience to negotiate their client the best terms.

Types of Finance Available for Adverse Credit Borrowers

Residential Mortgages

Borrowers with adverse credit can access residential mortgages through specialist adverse credit lenders. While traditional High Street lenders may not consider borrowers with adverse credit, specialist lenders often have more flexible lending criteria.

Bridging Loans

Bridging loans, by their nature, are much more flexible than traditional residential mortgages. When it comes to adverse credit bridging loans, borrowers with adverse credit are likely to have a few bridging loan options.

Development and Commercial Finance

Adverse credit development and commercial finance can also be sourced from specialist lenders, with some lenders offering specialist products specifically designed to cater to borrowers with adverse credit.

Key Considerations for Adverse Credit Applications

Affordability and Exit Strategy

Affordability is a crucial consideration for lenders when evaluating credit applications. In order to assess affordability, lenders will analyse the borrower’s ability to make loan repayments. Like affordability, lenders will also scrutinise the borrower’s planned exit strategy to ensure that they will be able to repay the capital amount at the end of the loan term. With this in mind, it is important to have a certain and foolproof repayment strategy.

Security and Loan-to-Value Ratios

Another important consideration for lenders when analysing adverse credit applications is the security itself. Lenders will likely require that the property returns a strong valuation and may even be restricted to LTVs as low as 50% for adverse credit applications.

Lender Risk Assessment Approach

For most cases, lenders will assess the borrower’s overall risk profile, taking into consideration why and how the adverse credit came about, the borrower’s risk profile, and the strength of the security property.

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How Silver Oak Capital Can Help

  • Access to Specialist and Niche Lenders

    Our vast lender network enables us to source the best loan products from the best lenders in the market, providing our clients with cheap access to flexible loan products.

  • Experience Navigating Complex Profiles

    Silver Oak Capital has an in-depth understanding of the real estate debt market in the UK, enabling us to advise our clients on the most suitable solutions, giving them peace of mind.

  • Independent, Client-Led Advice

    Client satisfaction is at the heart of what we do, so when we provide advice to our clients we ensure that it is correct and tailored to their situation. In doing this, we ensure that our clients have access to independent, situation-specific, sound advice.

FAQs

Yes, while previous credit issues may rule out High Street lenders, there are still plenty of specialist lenders who are comfortable lending to borrowers with previous credit issues.
Most specialist lenders with adverse credit products will offer these at a higher interest rate due to the increased risk of lending, although this might not always be the case.
Yes, often borrowers with adverse credit will refinance their adverse credit mortgage onto a mortgage with a traditional lender once enough time has lapsed and their credit score has increased.

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