With interest growing in this type of alternative finance, you may be wanting to know how to access UK bridging loans.
For the best help and advice, then the team of experts at The Bridge Crowd can help and this article will also give an overview of what bridging finance is.
Essentially, this finance is a type of loan to help bridge the gap that a borrower may have between needing money for a purpose, for example, buying a new house, while they wait for the money to pay for the loan to arrive, for example, having sold their current home, they can repay the loan.
Usually, bridging finance is used widely as a short-term, temporary solution.
The big attraction for a bridging loan is that it offers the applicant access to a large amount of money quickly.
A UK bridging loan can be used for
A UK bridging loan can be used for whatever purpose, whether that’s to buy property, redevelop a home or even pay an outstanding tax bill. What’s needed is a security property to help secure the loan against.
It’s important to appreciate that bridging lenders have a range of criteria when assessing an applicant and no two bridging finance lenders are the same.
You may find that a lender will not lend to companies but will to individuals, and while some may not carry out a credit history check, others may do and reject an application.
There may also be issues over the employment status of the applicant and the condition of the security property.
Despite this, bridging finance has grown in popularity because it has become more difficult to access finance from high street lenders and the process is quicker – the entire application process can take between seven and 28 days.
If you have an established relationship with a bridging lender, then it can be done in less time.
A bridging loan UK
Also, since a bridging loan UK should be seen as bridging a financial gap, then it’s usual for them to be taken out for up to 12 months.
Some lenders will offer up to two years but since it’s a short-term financial solution, they tend to be more expensive than mainstream financial products.
It’s important that you access a bridging loan that is suitable for your circumstances and the needs that you have.
Along with understanding the interest rates that are applicable, a potential borrower also needs to appreciate the maximum loan to value (LTV) they can access and how much they can borrow.
And since competition in the bridging finance sector is stiff, you may find that a borrower offers a great rate of interest but has hefty administration fees that need to be taken into account.
Indeed, it is the costs of a bridging loan that will need to be appreciated with most lenders having an arrangement fee that can range from 0% to 2% on the loan amount.
The lender will also make clear what the monthly interest rate will be and this will be stated as a monthly figure.
Administration and legal fees to pay
There will also be administration and legal fees to pay plus you will need to pay for an independent survey of the property you are offering as a security for the loan.
Another big attraction for bridging finance in the UK is the fact that there are several ways of repaying the loan, also known as the ‘exit route’.
Of the choices available, you’ll need to appreciate what your exit route will be, for example, if you know when you can repay the loan, then this is a ‘closed’ loan and will have a lower rate of interest.
The alternative is to opt for an ‘open’ bridging loan, which means you do not know when you’ll be able to repay the loan so there will be no fixed repayment date specified.
Should you reach the end of the loan’s term, then you will need to either clear it in full or there may be the opportunity of moving to another form of finance, for example, a suitable mortgage.
The other incentive for bridging finance is that many lenders will offer the opportunity of not having monthly repayments so the interest rate is ‘rolled up’ and you pay one lump sum when the loan term ends.
There are options to repay monthly and these will be made clear by the lender, particularly when you check what their loan will cost when using their online bridging finance calculator.
If you would like more help and advice about how to access UK bridging loans, then it’s time to speak with the experts at The Bridge Crowd.