Even though bridging loans are rapidly growing in popularity, there are still many questions potential borrowers are asking about what a UK bridging loan is.
This article will aim to answer the most common questions and we should start by explaining that a bridging loan is for a short period of time and they can also be arranged quickly as well.
The bridging finance is made to a company or an individual and is usually secured against a commercial or residential property.
The term bridging finance helps explain its role which is to bridge a gap between a borrower’s need and then receiving money to repay the loan itself.
For instance, bridging loans began in the housing market when a home owner wanted to buy a property but was still waiting for the proceeds of their home’s sale to come through. The loan was then ‘bridging’ the gap between buying a property and having the money to pay for it.
How do UK bridging loans take to arrange?
Another reason why UK bridging loans have grown in popularity is they are quick to arrange and for some borrowers they can have the money within a matter of hours – though they tend to already know the bridging loan broker and the lender.
It should be appreciated however that most bridging finance firms have sensible lending criteria and they will carry out a number of checks to satisfy themselves that loan is worth making.
Who applies for a bridging loan?
The range of people and businesses applying for bridging loans varies hugely and range from buyers, to property investors and professional landlords who are looking to develop a property portfolio or to refurbish a property to sell.
Businesses use bridging loans to buy stock for meet seasonal demand, for instance.
So why use a bridging loan?
The reasons for using a bridging loan are as varied as the purposes they can be used for and range from needing to raise finance quickly to meet an urgent need, to helping refurbish a property for selling and some developers use them to finish a development.
Bridging loans are also used buy property at auction and for buying a property that a mortgage lender will refuse to lend on.
Is a bridging loan UK expensive?
Because of their short term nature, a bridging loan UK can be more expensive than longer-term borrowing though with growing numbers of lenders joining the market, there are competitive interest rates available. The use of the loan will also have an impact on its cost.
What fees come with a bridging loan?
Most bridging loan lenders charge a fee for arranging the loan but this can be rolled into the final payment. Some lenders also charge an exit fee which is due when the loan is repaid.
Those are most of the questions that people interested in the UK bridging loan will be asking but for more help and advice, contact the helpful team at The Bridge Crowd.