For anyone who is looking for a fast and flexible way to access a large sum of money quickly, then UK bridging loans may work for you.
This type of alternative finance is generally over the short-term to help someone or a business meet an urgent financial need, whether that’s buying property at auction or paying an unexpected bill.
For those who need to buy a home when selling their current property, or to repair a break in the property chain, then bridging finance helps to bridge the gap between needing the cash and having the means to repay the loan.
One reason why bridging loans are for the short-term, they are usually for less than a year though some lenders will offer bridging loans of up to two years, is that they tend to have a higher rate of interest.
Bridging loan interest rates UK
The bridging loan interest rates UK tend to vary between lenders and the interest is charged on a monthly basis and acts as an enticement for the borrower to repay what they borrowed quickly.
In addition to the rate of interest, a lender may also have other administration charges for arranging the loan as well as broker’s fees, legal fees, and a surveyor will need paying to survey the security property.
It’s this property that will be needed to access bridging finance because the lender will use it as security before loaning any money against it. They will need an independent surveyor to assess its market value.
However, all bridging loan firms are upfront about these fees and the realistic costs of a short-term loan and it’s useful that most of them have a bridging loan calculator on their website to help understand this process.
These bridging loan calculators are also an effective way of comparing loans between different providers so you get the loan that will meet your needs and be reassured that you can meet the costs.
Need to understand two bridging loan terms
Potential applicants also need to understand two bridging loan terms from the very beginning.
The first is whether they know when they are able to pay their bridging loan to the lender and these types of loan are known as a ‘closed’ bridging loan.
That’s because the date when the money is available to repay the loan is known and if the applicant is not sure when or how they will have the means to repay, these are known as ‘open’ bridging loans.
Also, for those who sign up to a closed bridging loan will enjoy a lower rate of interest over someone who signs for an open bridging loan.
In addition, the flexibility of this alternative finance is underlined by the fact that borrowers may not have to repay interest on a monthly basis and can simply repay all of their interest charges when the loan falls due.
This is known as ‘rolling-up’ and may meet the needs of many bridging finance applicants.
This type of loan has grown in popularity
There’s no doubt that this type of loan has grown in popularity in recent years, mainly because High Street lenders have tightened their lending criteria making it more difficult to access large amounts of funding.
In addition, the lenders also take much longer to process a loan application than a bridging finance lender will.
Whereas a mainstream lender can take several weeks or even months to process an application, a bridging finance firm can carry out this process in 48 hours and in most cases in less than two weeks.
A lot depends on the type of property being offered as security and the lenders own criteria.
Some lenders may not be interested in carrying out credit checks so for those applicants with CCJs then bridging finance is a realistic way to access funding.
Bridging finance will meet these needs
In addition to firms, other loan requirements may see landlords looking to expand their portfolio, businesses wanting to refurbish premises or for the buying of a property that may not attract a mortgage, then bridging finance will meet these needs.
There is no restriction on the purpose of the loan for most lenders or on how much can be applied for but it is worthwhile shopping around to find the deal that best meets your needs.
Indeed, there’s a lot to recommend bridging finance and if you want to know whether UK bridging loans will work for you, then it’s time to speak with the experts and the BridgeCrowd to find out.