The reason why you may be looking for tips to access UK bridging loans is that the market has become increasingly competitive in recent years and you need to appreciate what borrowers are using these loans for.
There’s no doubt that bridging loans have grown hugely in popularity with borrowers as high street banks have tightened their lending criteria in recent years.
That’s the result of the financial crash, but people still need to borrow money for a range of purposes and it’s here that bridging loans have taken off because they can be used for just about any purpose.
It helps that the loan application process is a lot quicker and the lending criteria are not as strict.
Indeed, for most lenders, the only restriction on how much you can borrow will be related to the value of your security property.
A bridging loan UK
For those who may not be aware, a bridging loan UK is a short term financial product that is aimed at plugging a gap in the borrower’s finances.
Usually, people are aware of bridging loans because they are used for the purchasing of a new property while they are awaiting the sale of a home they currently own.
Also, bridging loans are popular because they are quick to organise, which makes them an ideal financial vehicle for those wanting to buy property at auction, for example.
Usually, a bridging loan can be arranged in time to meet the auctioneer’s 30-day deadline so you can confidently bid on a property.
Using a UK bridging loan
Others are using a UK bridging loan to refurbish or renovate a property before they sell it on for a profit.
One of the issues is that you may buy a property that will not attract a mortgage from a traditional lender in its current state, so you could use a short-term bridging loan to improve the property so that it will attract a mortgage.
Along with buying and refurbishing a property, a bridging loan in the UK can also be used for just about any need, as mentioned earlier, including:
- Settling a divorce
- Paying an income tax bill
- Refurbishing business premises
- Buying stock for business promotion.
The list is endless and if one particular lender is reluctant to agree with a loan to meet your need then you may find another lender willing to do so.
How a bridging loan is put together
This brings us onto the issue of understanding how a bridging loan is put together and how much it will cost you.
Just about every bridging loan lender will have a bridging finance calculator on their website that will help you work out how much a potential loan will cost and what the other fees are when doing so.
And since a bridging loan is a short-term funding solution, then most of the products will have a term that ranges from one month and up to 24 months. Most lenders will offer up to one year.
It’s also important to appreciate that the interest rates will vary between lenders, as will the fees.
The other issue to be wary about for those who have not sourced bridging finance previously is that the interest rate being quoted is on a monthly basis and not annually.
Bridging loan interest rates
The issue over bridging loan interest rates is also complicated by the fact that most lenders will have a range of different rates depending on the size of the loan and how long you need the finance.
On top of this, the lender will also charge different rates depending on whether your finance will be a ‘closed’ bridging loan or an ‘open’ loan. This means:
- A closed bridging loan will tend to have lower rates of interest because the lender will know when you are able to repay the loan
- An open bridging loan will have slightly higher rates of interest because you may not have the funds in place to know exactly when you can repay the finance.
It’s also possible to have the interest ‘rolled up’ so there is no need to pay a monthly amount until the loan falls due when the loan and the interest will need to be paid.
Whatever your circumstances are, and the reasons for wanting a bridging loan, it’s important that you shop around and speak to experts who understand how this sector works.
For more help and advice about accessing UK bridging loans, then you need to speak with the experts at The Bridge Crowd.