While they are mainly used for buying property, UK bridging loans are growing in popularity as a sound short-term finance solution.
Essentially, a bridging loan is designed to cover a short-term shortage of credit which leads to the term ‘bridging’.
They are also taken out for a few months rather than several years though some lenders will provide bridging finance for up to two years.
Typically, bridging loans have been used by home buyers who need to put down a sum of money on their new property before selling their current home which makes a bridging loan a suitable way to finance this need.
Accessing a UK bridging loan is also much easier
Accessing a UK bridging loan is also much easier and quicker than a loan from mainstream lenders since they can take from as little as two days to arrange though potential borrowers should appreciate that there may be an administration as well as legal fees to pay.
As mentioned previously, bridging loans are aimed at being a short-term financing option since they tend to be slightly more expensive than a mainstream mortgage would be.
In addition, the finance is aimed at those who have a clear exit strategy, this means the borrower knows how and when they will repay their bridging loan.
The interest rates for a UK bridging loan will vary from 0.5% to 1.5% every month which is also an incentive to repay the finance as quickly as possible.
Potential bridging loan UK borrowers
Also, potential bridging loan UK borrowers should appreciate that there is no set rate for interest charges since a lot will depend on the borrower’s circumstances and the purpose of the loan itself.
Some lenders also take into account the loan to value which is the amount they are willing to loan as a proportion of the property’s value.
The next most important issue for those considering bridging finance is the type of bridging loan available; there are two types, closed and open.
An open bridging loan is for a borrower who does not know when they take out the loan when they will be repaying it, for instance, their current property may still be on the market for sale.
However, a closed bridging loan tends to be more affordable and flexible since the borrower will know when and how they will repay the money.
For more information about UK bridging loans, then The Bridge Crowd have a helpful team who can help.