UK bridging loans are a type of finance that enables a borrower to achieve a short-term financial goal and then being able to repay the finance when they obtain the money to do so.
For instance, someone may be wanting a bridging loan to buy a property while they are waiting to sell their own home or for the proceeds to come through and need to ‘bridge’ the gap between spending money and receiving the money from a sale.
Bridging loans are also popular where there is a need for a quick access to funding, for instance for buying property at auction when the buyer has to provide the money within a certain time frame.
It’s also possible to use bridging finance to release equity from the borrower’s investment property so they can buy another property to boost their portfolio.
Businesses also use a bridging loan as a way to raise capital
Businesses also use a bridging loan as a way to raise capital so they can take advantage of an exciting business opportunity or they may simply want to buy more stock for a busy period while they wait for sales income to arrive.
Bridging loan borrowers also need to appreciate the difference between an open bridging loan and a closed one.
For instance, most loans are open since the borrower will not have an exit plan in place, that’s when the lender will receive their repayment.
The exit strategy for repaying a loan is the part of the application process since it enables the lender to judge the strength of the application and how much they are willing to lend, if at all.
The other type is a closed bridging loan which means the borrower has a defined exit strategy and knows where and how they will repay the loan from the very beginning. For instance, when they are accepted for a mortgage or the money from a house sale arrives.
Bridging loan interest rates UK are reasonable
While bridging loan interest rates UK are reasonable considering the wide range of purposes for the loan, they tend to be dearer than finance from banks though they do come with administration fees but there are no early redemption or exit fees to pay.
More importantly, bridging loans can range from several thousand pounds to several million pounds and depending on their purposes, lenders may offer up to 80% loan to value (LTV).
For anybody interested in UK bridging loans and wanting more information than helpful team at The Bridge Crowd can help.