There are many reasons why borrowers need to understand a bridging loan calculator and for those who have never considered bridging finance before, this article will explain why.
The most important reason is that a bridging loan calculator will spell out whether this type of alternative finance is for you and how much it will cost.
Most bridging loan providers will have a calculator as an online tool on their website so that the total cost of borrowing over the length of the loan can be easily calculated.
These calculators are straightforward to use and you will simply need to enter the amount you are looking to borrow, add the relevant monthly interest rate along with the administration costs and the loan calculator will then return the loan’s figures.
Calculators are growing in popularity because commercial bridging loans are becoming popular as a form of short-term borrowing and are mainly aimed at those businesses and organisations that may be experiencing a temporary cash flow problem.
Short term bridging loans that are available to residential homeowners
Most of us will have heard of short term bridging loans that are available to residential homeowners and these are regulated by the FCA whereas commercial finance products are not regulated.
It’s always important that borrowers read the terms and conditions for a commercial bridging loan and they will soon appreciate that these loans can be used for a wide range of purposes including the paying of tax bills, repaying urgent debts and for expanding a premises.
Others may need to access a large amount of money quickly, such as buying property at auction, and the finance is a popular route for landlords to build their portfolio. Some firms may need a large cash input to pay for a sales promotion, refurbish their premises or plug a financial hole temporarily.
Since the purposes of bridging finance loans are wide and varied, a lot depends on the criteria of the lender as to what the loan can be used for but all lenders will rely on the property to be used as security for the loan.
Also, while bridging finance tends to be slightly more expensive, the loans are generally for up to one year though some lenders will offer two-year terms.
Short term bridging loans UK are tempting to many firms
While short term bridging loans UK are tempting to many firms and people, the most important aspect when considering one is the loan’s interest rate and this is usually expressed as a monthly figure.
This number can appear to be high when compared with other financing options, which helps explain why the loan is generally over the short-term.
Also, the administration charges do vary between lenders and they can add up, so the online calculator tool will help work out what the bridging loan will cost and offer a way to compare and appreciate the different offerings between lenders.
Among the fees will be a facility fee or an arrangement fee and this can be from 0% to 2% on the amount being borrowed. This amount is usually included in the loan facility.
There may also be legal fees for setting up of the facility, a fee for the surveyor to inspect the property being used as security and some lenders will have an exit fee when the loan is redeemed.
It’s important to appreciate that the valuation of the property will be required and the surveyor is usually paid directly rather than having their fees added to the loan.
Bridging loan calculator is the best way to work out
Finally, the bridging loan calculator is the best way to work out how much interest will be added and there are terms that potential borrowers will need to appreciate.
The first term is when the interest is ‘rolled up’, which means that interest payments are not required and will be added to the balance every month and paid when the loan falls due.
As mentioned previously, bridging finance lenders do vary and have different offers and terms for their products; nearly all of them will have an online bridging finance calculator tool for their clients.
Finally, the only other issue for those who are looking to use the calculator to work out whether bridging finance is for them is to appreciate that for most calculators the monthly interest figure will be calculated as the interest amount being charged and will not include capital repayment.
If you are interested in bridging finance and want to know more about how to understand the bridging loan calculator, then it’s time to speak with the experts at The Bridge Crowd.