For many finance borrowers, bridge loan funding is a short-term option that helps them meet a pressing financial need but they must have a clear exit strategy when applying.
The main reason for this is that the cost of bridge loans can range from 0.55% to 1.5% per month which makes them a dearer alternative to the finance that may be offered by a mainstream lenders, for instance.
In addition, anyone interested in bridge loan funding also should appreciate that they come with administration charges and there may also be legal fees to pay as well; these will add to the cost of the loan.
Another reason why bridging loans are only suitable for the short-term is that the interest rate being charged will depend on the loan to value of the borrowing.
Demand for a short term bridge loan is growing
Despite the cost, the demand for a short term bridge loan is growing rapidly and that ever-growing numbers of lenders are entering the market so the variety of loans on offer, and their potential uses, is growing continuously too.
For most lenders, the loans are aimed at assisting people move home to buy a new property while selling their current home – the finance is effectively a ‘bridge’ between the two transactions.
Bridge funding is also useful for property developers and those buying property being auctioned as well as landlords looking to develop their portfolio.
Bridging loan rates vary from lender to lender
For those who are interested in this alternative finance should appreciate that the bridging loan rates also vary from lender to lender and on the size of the loan itself. The loan’s security will also have an impact on the rates being charged also.
It’s also important to appreciate that the interest rate that will be applicable is charged on a monthly basis which makes this form of finance more expensive than is provided by a high street lender, for instance.
Also, when lenders discuss their bridging loan interest rates, the size of the loan itself can also vary with some lenders offering amounts from several thousand pounds while other lenders will offer several million pounds, depending on their lending criteria.
Finally, for anybody interested in bridge loan funding it is possible to ask The Bridge Crowd who have the expertise and experience of the market to answer relevant questions.