One of the best ways to determine whether a bridging loan is right for you is to use a bridging loan calculator.
Just about every bridging loan finance firm will have one on their website to help illustrate what the finance deal will cost.
It’s also important to appreciate that the calculator is not there to perform a credit check and the firm will not be passing information to third parties.
Instead, a bridging loan calculator offers potential borrowers a simple way of looking at their options, find out how much the loan will cost and help provide information without having to meet someone in person.
The calculator really is a convenient way of assessing whether the bridging loan being offered is right for your needs and this type of loan is growing in popularity.
One reason for this is that high street banks have tightened their lending criteria over the years, so it’s more difficult to access funding.
Short term bridging loans UK lenders
That’s not the case with short term bridging loans UK lenders who can offer amounts ranging from several thousands of pounds to millions of pounds without the borrower needing to give a reason for the loan’s purpose.
Instead, a borrower will need security, usually in the form of property, with the loan being made against this.
The bridging loan calculator will have the surveyor’s fees necessary to evaluate the property and the borrower will pay this amount.
In addition, other items listed in the calculator will include the loan amount, the term, the loan’s term and the rate of interest to be applied.
There are also the extra fees will also be highlighted such as the lender’s administration charge which could amount to between 0% and 2% of the total amount being borrowed.
Bridging loans UK
While bridging loans UK tend to be dearer than loans from high street banks, one of the big attractions for using a bridging loan calculator is that everything will be detailed, so there are no hidden fees or nasty surprises.
However, some people may not be aware of what a bridging loan is and it’s simply a form of short-term finance which is flexible and can be accessed quickly.
A bridging loan is usually repaid within one year, though the annual rate of interest being charged tends to be higher than that from high street lenders.
Bridging loans are popular with property investors and developers who can use the finance to enjoy an investment opportunity when they need to act quickly.
Developers can use a bridging loan to develop or convert a property until it is sold or the property is brought up to a standard that would attract a mortgage.
Most people will hear about bridging loans when they need to buy their house without having sold their current property.
Bridging loan will effectively ‘bridge the gap’
The bridging loan will effectively ‘bridge the gap’ between they’re buying their new home and their current house sale.
While property or other collateral will be required, some firms may not undertake a credit check, which makes this form of finance popular with those who may have a poor credit history.
Also, the lender may not require proof of income and simply require security to cover the loan.
As we’ve already highlighted, bridging loans tend to be for the short term and the rate of interest makes them unattractive over the longer term, which is why most loans are for 12 months.
Type of bridging loan being applied for
However, the same lender may offer different rates of interest, depending on the type of bridging loan being applied for. For instance, should someone know when they have money to repay the loan, for instance, when they sell their house, then this is known as a closed bridging loan.
This means that the lender is reassured of getting their money when agreed so will offer a better rate of interest.
Alternatively, for those borrowers who may not know when they can repay their loan, then this is an open bridging loan and tends to attract higher rates of interest.
It’s also possible that borrowers don’t have to repay interest on a monthly basis, but instead can ‘roll up’ the interest charges and repay everything when the loan falls due. This may be a big attraction for many potential borrowers.
Bridging loan finance for a range of purposes
There’s a lot to recommend bridging loan finance for a range of purposes and if you need to know why you need a bridging loan calculator and to understand more about this type of alternative finance, then it’s time to speak with the experts at The Bridge Crowd.