There are several reasons why you should consider a bridging loan which is uniquely affordable and accessible to individuals and businesses alike.
Also, depending on what you need the funds for and when you need the money makes this type of alternative finance a flexible and increasingly popular choice.
There are a number of big differences between a bridging loan and a loan from a high street lender.
The first issue is that the application process for bridging finance is much quicker than applying for a bank loan or mortgage.
In some cases, a bridging loan can be arranged in a matter of days, particularly if the borrower has a relationship already with the lender.
This compares with the several weeks or months that are required typically to underwrite a conventional mortgage or loan, which helps explain why bridging loans have grown in popularity.
Potential purposes of bridging loans UK
The next important issue is for the potential purposes of bridging loans UK which many applicants may be surprised to find is unlimited.
While a traditional lender and bank will be specific over the intended purposes of the money which means they may not be willing to consider some purposes when a loan application is made.
In contrast, a bridging loan can be used for just about any purpose and many lenders will not ask the question of the purpose for the funds.
Instead, bridging finance firms will need an applicant to prove that they can repay the loan when required and have a security property to cover the loan’s value.
Another aspect for bridging finance that businesses and individuals alike may appreciate is that the repayments are flexible.
Instead of a bank telling the loan applicant when and how they will repay their loan, bridging lenders tend to offer a choice in terms of the loan’s duration, which can be from several days and up to two years.
Bridging lenders tend to be flexible over interest payments
Also, bridging lenders tend to be more flexible over interest payments and it’s possible not to repay anything until the loan falls due.
Some borrowers may opt to have this choice with the interest payments ‘rolled up’, whereas others will look to repay the interest every month.
And since the bridging loan is secured against a valuable asset, usually a property or a home of some description, most lenders have relaxed lending criteria.
This means that they may not carry out a credit check, or ask for proof of income and may simply require that the borrower puts up the required collateral for the bridging loan.
In addition, the bridging finance will have administration charges to pay once the loan is accepted and there will be a need for an independent surveyor to value the security property.
Some lenders also have other charges and all of these are explained upfront and most lending firms have an online bridging loan calculator so a potential borrower can see exactly what their borrowing will cost.
Bridging finance offers flexibility
While bridging finance offers flexibility, a potential borrower will need to appreciate how they intend repaying their loan before they take it out.
This is also an important element in how much a lender will demand in interest charges.
For example, should someone know when they can repay the loan it is known as a ‘closed’ bridging loan and these tend to attract a lower rate of interest.
For those who do not know when they can repay then this is known as an ‘open’ bridging loan and tend to have higher charges attached.
Mostly, bridging finance is repaid from the sale of a property, refinancing longer term debt or receiving money that is due.
Bridging finance is not just for the purchasing of property, though this is how most people are aware of the term, and businesses can also access funding quickly to meet a range of needs. This may include refurbishing their business premises, pay for stock or meeting a short-term cash flow issue.
Individuals can apply for bridging finance
In addition, individuals can apply for bridging finance to either buy property, refurbish a home or buy property at auction, knowing that they can arrange the finance in time to meet the auctioneer’s deadline.
On top of this, individuals may also need to arrange bridging finance to meet an unexpected and large financial bill, for example, a tax demand. If they have the property for security, then they will be able to access bridging finance to meet their needs.
If you would like more information about why you should consider a bridging loan and find out how much it will cost, then it’s time to speak with the experts at the Bridge Crowd.