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Bridging finance is becoming popular in the UK over time, but you may wonder whether bridging loans is a good idea to take out such debt or not. It is a financial product that high street lenders and financial institutions offer. It is used to bridge the financial gap when you need funds to buy something, but are waiting for funds to become available by selling something else.
For example, it is sometimes difficult for people to sell their property and purchase a new one at the same time. With a bridging loan, you can resolve this problem.
“It helps you move quickly towards buying your new home and giving yourself some more time to sell your existing property.”
There are many more lenders in the market. Still, you should completely understand how bridging debt works and what are its advantages and disadvantages to choosing whether it is suitable for you or not. You can also go to the financial experts to get advice. It will help you in making an informed decision.
Bridging finance is a specialist type of debt, so we suggest you take bridging loan advice from an expert before taking out a loan. It will help you understand whether it is right for you or not. It is a type of short-term loan usually taken out when you find it challenging to get funding from anywhere else.
“A bridging loan is different from traditional bank loans and acts as a temporary debt until you can refinance by selling a property or qualify for a long term loan.”
You can use a bridge loan for property development, buying a property, business ventures, buy to let investment, paying tax bills and divorce settlements. Typically, lenders offer this type of loan for 1 to 18 months, and you have to return the entire amount at the end of the loan term.
You should never decide to take out a bridging debt without prior planning. You always need to do much research to ensure that it is the best option for you.
“Here are three key factors that you should always keep in mind when it comes to selecting a bridging loan:
Before applying for bridging finance, you need to understand this type of finance, including how it works and the fees that are involved with this type of finance.
This type of debt is typically designed to fulfil your short term financial needs related to property or land purchase, but all the applications are not straightforward.
Getting the right expert advice at the right time will help you understand the complete process of taking debt and help you find the best quote according to your individual circumstances.
With a bridging fund that is based on a short term repayment plan, having a clear and strong exit strategy means your lender will be confident about the repayment of the debt amount. When you are putting your repayment strategy in place, it is vital to take into account the interest rates, all the applicable fees and the initial debt amount.
Due to the short term nature of the bridging debt, the interest rate is usually higher than the long term loans. You also need to describe and provide proof to your lender that you are able to repay the borrowed money.
Usually, the following three ways are used to repay bridging finance:
This type of financing comes with many advantages, some of which are as follows:
Thanks to this fast process, you can receive funds quickly to purchase a property as an individual and
business owners can purchase equipment, meet payroll and pay for inventory with this financing.
Bridge funds are vital for you if you are trying to bid on new projects or need to complete a job. No matter if you want to purchase a real estate property or another business, bridging finance helps you to leg up against other bidders as you can close the deal faster.
Unlike standard mortgages, in bridging loans UK, you have an option to add monthly interest payment to the final payment. It is a perfect option for investors and companies who are concerned about ongoing cash flow.
However, they are more interested in the value of the property you are using as collateral and the exit route. The amount of debt thus depends on the worth of your property.
In most cases, the debt amounts are arranged within hours and funds are released within 72 hours. But it can take a long time, and you might have to wait several weeks to get access to the funds.
“A bridging loan is a solution that allows an individual to move swiftly and take advantage of the market situations, such as at an auction.”
A bridging debt can be arranged quickly as compared to the traditional bank loans, but most of the bridging companies have a complex procedure for approval. However, lenders are very agile and expert in getting the necessary information from the borrowers and issuing funds as soon as possible.
Before you apply for a bridging loan, you need to make sure whether this loan is right for you or not. As it is one of the most expensive borrowing types, you may not be able to afford this loan. On the other hand, it can be helpful in purchasing a new home or an asset only when one of your assets is going through the sale process.
Thus, you should do proper planning about the repayment and exit strategy. You should know where and how you will get
the money to pay off the debt. Moreover, you should have a second option for repayment if your first plan fails.
Numerous factors can delay the application process. In some cases, the lender’s own practices may cause delay. One major factor is the credit rating of the borrower. The better the credit rating of a borrower, the easier for them to qualify.
The other factors include the value of the asset you are using as collateral and your repayment strategy. If a lender finds that your credit score is good, your asset is valuable, and you have clear plans for repayments, you can get quick approval and receive money in your bank account quickly.
The best bridging finance providers pride themselves on providing quick finance, but you can see that some are faster than others. Some lenders may turn you away on an eligibility basis.
If timing is your concern, being told no due to any reason can cause more delay in getting funds.
You should always meet the eligibility criteria if you want to get funds as quickly as possible. When you approach multiple lenders to get quotes, it can impact your credit score.
So we suggest you consult a specialist bridging finance advisor that can not only protect your credit score from going down but also save your time by matching you with the right provider.
In addition, the financial advisors know about the market, so they can help you find the best deal within a short period.
Bridging finance is an ideal solution to fulfil your short term financial needs. It offers several benefits to the borrowers, such as an easy application process, quick access to funds, and flexible lending criteria. You can use this debt for any legal purpose but always keep in mind that the interest rate is high compared to traditional debts.
If you want to get quick approval, you should meet the eligibility criteria set by the lenders. You must have clean credit, an exit strategy and a valuable asset to use as a security against the loan. When you meet this criterion, most lenders are likely to provide you with a loan at the best affordable rates.
Bridging loans are very beneficial as well as they have some disadvantages. Thus, taking a bridging loan is a good idea or not; it all depends on individual circumstances, such as for which purpose you are taking a loan.