A bridging loan is the amount of money lent from a bank or any high street lender to cover the gap between two transactions, typically buying a home and selling the other one. It is a type of short term loan and used until the business or individual arranges permanent financing. Usually, you have to repay the loan amount within a year. It is available for both businesses and individuals and borrowers can customise loans for different situations. Bridging finance provides immediate cash flow to fulfil immediate obligations.
If you are considering applying for a bridging loan and want your application accepted quickly then you should meet the eligibility criteria. Here we are providing you with a guide on bridging loan eligibility to help you in getting quick approval.
Who Is Eligible For Bridging Loan?
Bridging loan providers usually do not focus on your credit score or your income; they are concerned with the market value of the property you are using as security. The eligibility criteria vary depending on the lender you choose and borrowers need to fit in these criteria to get funds. However, most borrowers must fall into the following:
- Borrowers must be over the age of 18 and some lenders have an upper age limit.
- For a business bridging loan, you must own a private individual or limited company.
- Borrowers must have one or more properties that can be used as security against the loan.
- Live in the Uk, or have a registered address in the UK.
- Want to borrow at least £10,000.
- Another important thing is an exit strategy. A borrower must have a defined exit plan to repay the loan amount.
What Can You Use A Bridging Loan For?
Generally, bridging loans are used by property developers and landlords to complete the purchase of a property. However, there are many other situations when a borrower can use a bridging loan.
Here are a few reasons when a person may require a bridging loan.
Property Renovation Or Refurbishment
Sometimes the property is considered unsuitable for a mortgage because it is in a poor condition. Or in the case of residential property, it may lack a kitchen or bathroom. Thanks to bridging loans that it accepts the property as a security that mortgage and other loans reject. It helps property developers and other individuals who need funds to renovate a property before sale to increase its value. These loans are very secure and can be used to cover the renovation cost. You can repay the loan amount after the sale of your property or when long-term finance becomes available.
Buying a property At Auction
Auction is a great opportunity for landlords and property developers to purchase a property. After winning a bid at an auction you have to pay a 10% deposit on that day and the remaining amount within 28 days. Bridging loans can be used to purchase property at auction because they are relatively quick and easy to get. You can complete the purchase within a given time frame by using bridging finance.
Solve Business Cash Flow Issues
Almost every business faces a cash flow problem at some point for a number of reasons such as customers paying late invoices, a bank call for an overdraft facility, and seasonal factors. A bridging loan can also help you to solve these problems and keep your business running smoothly. You can use the loan amount to pay wages, restock products, purchase new equipment, cover market costs, or pay the tax bills.
Breaking The Chain
When you are looking to purchase a new house one major thing that holds you back is that your current home is not sold yet. Here you need short term finance that fills the financial gap so that you can complete the purchase of a new home. When the sale of your property is completed you have to repay the loan amount. This is the most traditional and common use of bridging loans and a way to break annoying property chains.
If your property is at risk of repossession, you can use a bridging loan amount to pay the debts and prevent repossession of your property. In this way, you are able to sell your property on your terms and can avoid the forced sale.
Now that you know the bridging loan eligibility criteria and how they can help you in different situations when you need quick finding, you can make a decision to get a bridging loan. Whenever you decide to get a property bridge loan, business bridge loan or bridging loan for any other purpose it is advisable to choose a provider that has a good track record and offers low interest rates. There are many comparison sites on the internet that provide you with a comparison of the UK’s top bridging loan providers. You can visit our comparison page for bridging loan companies to find the best one for you.