How to buy property at auction with bad credit

How to buy property at auction with bad credit
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    Investing in property at auction can be a great way to build wealth, but securing a traditional loan can be difficult for those with a poor credit history. Fortunately, it is possible to secure funds to buy property at auction, even with bad credit.

    An auction finance lender specialises in providing short-term bridging loans. The good news for investors with bad credit is that these lenders are less concerned with credit history than a conventional mortgage lender, as long as the borrower has a viable exit strategy.

    Auction finance is a short-term loan, typically between 1-18 months. These types of loans are on a monthly interest-only basis, and funds can be made available much quicker than a traditional mortgage.

    Read on for our useful tips on how to secure finance for auction purchases with bad credit and the steps in doing so.

    At One Commercial Loans, we provide impartial advice on the whole market to support our clients in a wide range of property-related finance. Our experienced leadership team can assist you in finding a quick solution for auction property finance and bridging loans, even if you have a bad credit history. Contact us today for a no-obligation discussion.

    Does your credit rating affect your loan eligibility for property auction finance?

    Lenders assess applications for property auction finance on a case-by-case basis and are more flexible than mortgage lenders due to the short-term nature of the loan. If you have proof of income and a solid exit strategy, then your credit rating is less likely to have an impact on their decision.

    A large deposit and a strong track record will also count in your favour and make you more creditworthy in the lender’s eyes.

    Why use property auction finance?

    The world of property auctions is fast-paced, so investors need quick access to funds. Property auction finance provides an ideal solution, as funds can be made available quickly and with less paperwork.

    One of the huge benefits of these types of bridging loans is that they can be secured in advance. A 10% deposit for the winning bidder can actually be a significant cost, particularly for those who are first-time property investors.

    Securing a short-term auction loan in advance means you know exactly what your budget is and can feel confident in paying the deposit and completing it within the short time frame involved.

    Even with a history of poor credit, auction property is still a viable investment, as lenders are more likely to approve you on the strength of your exit strategy than conventional mortgage lenders.

    What is used to secure auction finance?

    Auction financing is generally secured on the property being purchased, as well as any additional security offered, e.g. other properties or land. This means that lenders will assess the value of the property and any security offered before making their decision.

    Can you bid at auction subject to finance?

    Yes, but it depends on your appetite for risk! You must ensure you have the minimum deposit on the day, and if you submit the winning bid, you are legally obligated to go through with the sale.

    Auction purchases generally must be settled within a 28-day window. While bridging finance can feasibly be secured within this timescale, it is not guaranteed. So it is always best to secure finance before the auction day to provide you with security and confidence when bidding.

    Who is eligible for property auction finance?

    The criteria for auction finance varies from lender to lender, but in general, you should be over 18 years old, have proof of income and fulfil the following conditions regarding your deposit and exit strategy.

    Exit strategy

    The main concern of an auction bridging finance lender is your exit strategy, i.e. how you propose to pay off the loan. The more compelling evidence you have of how you will settle the loan, e.g. selling/remortgaging, the more chance you have of approval.

    For our tips on developing an effective exit strategy, see the section below.


    Most lenders ask for a deposit between 10-25%. Generally, the higher the deposit, the lower the interest rates are.

    Credit history

    For many lenders, poor credit reports are not a deal-breaker, providing the exit strategy is strong. However, your repayment plan will still need to take into account any adverse credit history, as refinancing could be impacted by any evidence of missed payments, CCJs, or defaults that will show up on any credit checks.

    Property experience

    While it’s possible for first-time auction buyers to get finance, if you have an existing portfolio and a strong track record, then a lender will probably perceive you as lower risk. Your property portfolio can also be used as extra collateral, providing further confidence.

    One Commercial Loans’ guide on finance for auction property

    One Commercial Loans has vast experience in helping our clients to secure the funds they need and fast.

    Here’s our 5-step guide to securing fast auction property finance:

    Step 1. Choose the property or land you’d like to bid on

    Auction houses list land and property for sale in a catalogue some weeks before the auction, so you can browse and find the right deal for you depending on the purchase price, deposit required, loan amount and resale/rental opportunity. While you can use an auction finance calculator, it is best to consult an auction finance expert (see step 2).

    The auction house will generally require 10% of the sale price on the day, with full payment usually made within 28 days. Remember that there are likely to be auction fees (such as administration fees) added to the final total.

    Step 2. Find the right auction finance broker

    Finding the right broker significantly improves your chance of securing funds for an auction purchase. Depending on the type of property or land you wish to buy, they identify the right specialist lenders to fit your circumstances and find you a good deal with the most favourable interest rate.

    Due to the fast turnaround required when buying property at auction, a broker is best placed to make an application for finance, as they know exactly which lenders are likely to approve your application, saving you time and enabling you to be more agile with your purchases.

    At One Commercial Loans, we excel in matching investors with the right finance brokers so that they can secure the funds they need for auction properties fast.

    Step 3. Develop your exit strategy

    1. Begin with the end in mind: Start by defining your goals and determining what you want to achieve, e.g. are you looking to refinance the property and generate a rental income? Are you looking for short/long-term capital growth?
    2. Determine the timeframe: Establish a clear timeline for when the bridging loan should be fully repaid.
    3. Analyse the market: Research the property market to understand how it might affect your exit strategy and identify any potential opportunities and risks.
    4. Identify potential buyers and develop a marketing plan: If you are looking to sell property on, identify potential buyers and define how you will target and attract them.
    5. Establish contingency plans: Consider potential issues or challenges that could arise and create a contingency plan to address them.
    6. Monitor your cash flow: Provide evidence of your forecasted income to give the lender more confidence in your ability to make the monthly repayments.
    7. Seek professional advice: Consult an experienced auction finance expert such as One Commercial Loans for guidance on how to optimise your exit strategy.

    Step 4. Gather the necessary documents

    You will need to provide all relevant documents for the loan application, such as proof of income, bank statements, proof of current address and any other documents related to the property being purchased, such as a valuation report (although this might not always be necessary).

    Again, this is where the services of a good finance broker can be very valuable, to save you precious time and effort.

    Step 5. Submit the application

    Your broker will then submit your loan application to the lender and negotiate the loan on your behalf. If approved, the funds will be available in a few days for you to complete the purchase.

    Have a property in mind? One Commercial Loans can help you buy auction property with confidence

    If you have bad credit but are looking to purchase an investment property at auction, a bridging loan from an auction finance lender is likely the best option.

    At One Commercial Loans, we have access to a wide range of experts who specialise in brokering auction finance. They can save you precious time and provide valuable advice to help you secure the best deal available within your deadline.

    Contact us today to find out more about how you can secure auction finance with poor credit and how we can match you to the right member of our extended finance broker team.


    Specialist auction finance lenders consider a solid exit strategy more compelling than a spotless credit history. So unlike a mortgage, someone with bad credit can secure finance to make a property purchase at auction.

    It is very wise to find a professional broker that is a good fit for your circumstances, which is where One Commercial Loans can help.

    Mark Piper
    Mark Piper

    Mark is the senior advisor at One Commercial Loans and has a wealth of experience in bridging and property finance.

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