Bridging Loans are used in order to supply finance for purchasing a new property, while the borrower is waiting for their current property to sell or just raise short term finance. However, it is becoming a very popular choice for individuals with limited resources. They can be employed for any purpose, as long as the lender accepts the offered security and exit strategy and is satisfied the borrower can service the loan. All bridging loan lenders will need to have a exit strategy for repayment before any funding will be approved. The term for repayment can be used to satisfy individual needs, the majority of bridging loans have a term less than a year.
Bridging Loans who wants one?
Anyone that is knowledgeable about the loan facility and how it works and upside and downside, understands the modus operandi, and has a plan for repayment can borrow money through a bridging loan. Bridging loan companies have been used by prospective residential or commercial property purchasers and developers. The funds could also be used for individuals that are seeking to buy a property, and develop it, and then put it back on the market for sale. Individuals in financial difficulty can use the loan to avoid repossession of their home. Bridging is ideal for all people that need some money and space to arrange an longer term facility or sell the property. Since the loans can range in value from £50,000 to £100m, there are lots of options. The cost of a bridging loan is expensive and a lot of people shy away once aware of the term and finance rates.
Benefits of a Bridging Loan or Punishment for Non Settlement of the Loan
Bridging loans can be beneficial for providing a flexible form of finance for short a period, which allows fast finance and a temporary injection of cash. Some bridges become available within as little as 48 short hours after acceptance and all the legal’s are in place. The loans have increased in popularity, so individuals can get finance through this financial product. Although, the company will review the borrower’s financial situation to ensure they can meet payments and have an exit strategy and even ask for additional security to be given. If the exit and full repayment is not properly executed, the individual will face some heavy penalties that feel like a financial punishment.
There are many alternatives to bridging loans that borrowers should consider, such as secured loans, conventional mortgages and second charge over existing properties if equity is available, asset finance, and commercial lending. However, bridges offer a opportunity to access funds very fast.