For anyone interested in short term bridging loans then they need to be aware of some of the terminology and how bridging loans actually work.

This Bridge Crowd blog follows a previous article which explains more about bridge loan funding and explains the criteria that lenders are working to and what that money can be used for.

However, there are two types of bridging loans that borrowers need to be aware of and they are known as ‘open’ or ‘closed’.

In the first instance, an open bridging loan is aimed at those borrowers who have not got a timeframe in place for how long they need it for before repayment and they don’t know where their main source of finance is coming from.

Using a bridging loan calculator

For example, an open bridging loan will appeal to somebody buying a house but is waiting to sell their current property. Open bridging loans are generally the more expensive option and this is where using a bridging loan calculator comes into good use.

Indeed, this underlines what we explained in our previous blog about having an ‘exit strategy’ in place when applying for a bridging loan since the borrower will appreciate how long the loan is going to be for and how, or importantly, it is going to be repaid.

This then leads onto the second type loan which is a closed bridge loan since the borrower will have a firm plan in place for how long they need the money for and how it will be paid.

For example, a closed bridge loan may be attractive to someone selling their home and who has already exchanged contracts so they have a mortgage offer in place and is waiting for the money to come through. A closed bridge loan is cheaper than an open one and it’s also more flexible and more available.

Considering short term bridging loans UK

Many people considering short term bridging loans UK will want to know how much it will cost since they only need it for a short term to help cover a cash shortfall. A monthly interest charge on a bridge loan could be up to 1.5%.

However, the duration and size of the bridge loan will also dictate how much interest is charged and also on what the loan is used for as well as the type of property, business or land that the borrower wants to buy.

The lender will also carry out a credit check so the borrower’s credit rating will also be important and how much of a deposit, particularly for property purchases, the borrower is willing to put towards the loan to bring down its LTV (Loan to Value).

Borrowers interested in short term bridging loans should also appreciate that in addition to the monthly interest charge there are also other administration charges which will cover legal and valuation fees but more information about these are available from the helpful team at the Bridge Crowd.

What are short term bridging loans?

Leave a Reply