Over the last few years, the bridging loans UK industry has grown hugely in popularity as growing numbers look to secure flexible and quick funding.
Most of these applicants are looking to secure a property purchase but it’s important to appreciate that bridging finance is really a short-term loan product that will plug any financial gap.
Essentially, most people know of bridging loans as a way to buy a new property while the anticipated sale of their current home goes through which will then release the funds to repay the bridging loan.
However, bridging loans UK are also a useful funding option for those who are looking for quick finance such as investors wanting to buy a property at auction.
Others may be looking to refurbish or renovate a property quickly before then selling it on at a profit.
As mentioned, a bridging loan should only be seen as a short-term funding option and most products will have a loan term ranging from one month to 24 months.
Most lenders will offer 12 months on average, with the administration fees and interest charges usually being ‘rolled-up’ and settled when the loan falls due.
Find the best bridging loan
The interest rates between lenders will vary and their administration fees will also be subject to variations, so it’s always worthwhile shopping around to find the best bridging loan for meeting your needs.
Also, unlike a traditional mortgage, the interest on a bridging loan will be charged on a monthly basis with the full amount being paid at the end of the term and there’s no need for monthly instalments.
It needs to be appreciated that the only fee that needs paying is for the valuation report, but otherwise, there are no upfront costs that a borrower will be expected to pay.
The other attraction for a bridging loan is down to how much you can borrow.
Since the amount will be restricted to the type and value of security property being used by the applicant, you can borrow from several thousands of pounds to several millions of pounds.
That’s a very attractive incentive for many businesses who may, for example, be wanting to plug a cashflow problem or to invest in the refurbishment of their premises.
But it’s not just businesses who are accessing this type of finance, there’s also a growing trend from others who are, for example, looking to pay a large tax bill that falls due or who may simply want to take up an investment opportunity.
Sourcing a bridging loan
When it comes to sourcing a bridging loan, not only are there growing numbers of lenders entering the market but they also have a very quick decision-making process, unlike high street lenders who can take weeks or even months coming to a decision.
With bridging finance, you can have a decision in principle within a day or two, with a formal offer being made within one or two weeks. This means that the completion of the process, which will include the creation of the legal paperwork and an independent valuation of the security property, will take between two and four weeks.
Another appealing aspect of bridging finance is if the applicant has credit issues, for example, a poor credit rating.
For many lenders, the finance is determined by the security that’s in the property and the exit route being offered.
This means that the borrower knows when they will have the money to repay the bridging loan, this is known as a ‘closed’ loan, and these tend to attract the lower rates of interest.
Alternatively, those borrowers who do not know when they are able to repay their bridging finance will have what is known as an ‘open’ loan and these tend to cost more.
So, we’ve mentioned in this quick guide that bridging loans have a faster application process, an applicant can borrow fairly large amounts depending on the security property and the borrowing itself is on a flexible basis.
Short-term nature of bridging finance
It also needs to be appreciated that because of the flexibility and short-term nature of bridging finance, the interest rates tend to be higher than from high street lenders.
Also, the loan will have an administration charge and this can be relatively high depending on the amount being borrowed.
The borrower also needs to appreciate that the bridging finance is being secured against their property and they need to think carefully before going down this route to borrow money.
If you would like more help and information about bridging loans UK, then it’s time to speak with the experts at The Bridge Crowd.
Firstly, peer-to-peer lending – also known as P2P – has grown in popularity in recent years as investors look for better rates of interest on their money rather than, for example, leaving funds in a savings account.
It’s this low interest rate environment that has helped to fuel the take-up in peer-to-peer lending and borrowing.
For those who may not appreciate it, peer-to-peer lending is a type of direct lending to businesses or individuals and it is usually done through an online platform that will match a potential borrower with a potential lender.
Peer-to-peer lending is a type of alternative finance and it’s a straightforward process with each transaction being processed by a platform, for example, The Bridge Crowd.
There’s no doubt that there are advantages for both lenders and borrowers under the peer-to-peer lending banner and the most attractive is that the investor will earn higher rates of interest.
Also, borrowers will find that peer to peer lending tends to be more accessible for funding than when applying to a financial institution.
The borrower will enjoy lower rates of interest because there is greater competition between P2P lenders.
The growth of peer-to-peer lending means that these types of loans are an alternative option to traditional high street lenders, but not every borrower will be familiar with the concept.
The peer to peer application process
Borrowers will find that the peer to peer application process is much quicker than with a traditional lender and the money can be used for a wider range of purposes.
P2P loans tend to have more flexible terms with a convenient and quick application process offering a great opportunity for those who want to access funds quickly.
Most platforms offering P2P lending have investors waiting to provide loans to applicants so it is possible to access large sums of money in just a few hours.
One of the advantages with peer-to-peer lending is that the lender will not have the typical overheads that most financial firms will have and it’s these low running costs that help deliver favourable interest rates.
Bridging loans rates will vary
For those who are interested in peer-to-peer lending mortgages then The Bridge Crowd platform, for example, makes clear that the loans are secured by a mortgage over the property which must be in the UK and the bridging loans rates will vary according to the borrower’s circumstances.
This will then deliver an average 12% return per annum to the investor who will choose the deals that interest them.
As with all financial investments, it may be a good idea to take independent financial advice but investors can receive better returns and the P2P loan is for a maximum of 12 months, with the average loan term being six months.
It also needs to be appreciated that the property that will attract the mortgage will be independently valued by a RIC’s surveyor and the maximum loan to value (LTV) ratio is 70%.
With more than 20 years of experience in dealing with bridging finance, The Bridge Crowd has underwritten and redeemed £68.5 million in loans.
Disadvantages with peer-to-peer mortgages
The disadvantages with peer-to-peer mortgages for borrowers include the need to pass a credit check and other verification measures that the lender may put in place.
There may also be a need to pay a P2P application fee which the applicant will not need to do when applying for a loan with a building society or bank.
Also, some P2P firms will charge an arrangement fee on each loan that they match between borrowers and lenders.
As mentioned earlier, peer-to-peer lending has grown in popularity with lenders and borrowers alike since this is a property-backed investment which is essentially protected by the underlying value of the property being invested in.
So, should a borrower default on their P2P mortgage, then the holder of the first legal charge can take possession of the property and begin the process for recovering the investor’s money.
Typical peer-to-peer mortgage borrowers
Usually, typical peer-to-peer mortgage borrowers tend to be property developers looking to refurbish and then quickly sell on an investment opportunity and need access to the cash quickly and they also have the ability to repay within the time limit.
If you would like more help and information about the pros and cons for a peer-to-peer lending mortgage, then it’s time to speak with the experts at The Bridge Crowd.
As with most things in life to do with money, it’s always a good idea to get advice before making a decision, and this is true about UK bridging loans as well.
With a plethora of bridging finance firms entering the marketplace in recent years, means there’s a wide range of alternative finance products to choose from.
For those who are interested in bridging finance or peer-to-peer lending, then it’s perhaps time to speak with the experts at The Bridge Crowd.
The team will be able to explain the finer points of a bridging loan.
But what is a bridging loan? Essentially, these loans are interest only, short-term loans with the aim of bridging the gap the borrower may have between needing to purchase something and having money to pay for it.
A bridging loan was used by home sellers
Traditionally, a bridging loan was used by home sellers who needed to buy a new property and were essentially bridging the gap between buying that home and receiving the money from their own house sale to pay for it.
Typically, interest rates on bridging finance tend to be higher but they are also quicker to arrange then traditional secured loans and mortgages and they are a flexible solution for many.
In order to access a bridging loan, the borrower will need to provide proof of their exit strategy, which means showing that they will have the money to repay the loan when required.
There are two types of bridging loan and they are known as ‘closed’ or ‘open’; a closed bridging loan is for those borrowers who know when they will have the money to make the repayment, whereas an open bridging loan is aimed at those who do not know.
The big difference in these loans is that a closed bridging loan will have a lower rate of interest because the lender knows that the loan can be repaid.
One of the big attractions for this type of alternative finance is the ability to have an approval and receive the funds in days or weeks.
For example, for those who want to buy a property at auction, they can make a bid knowing that they can have the money from a bridging lender in time to meet the auctioneer’s deadline.
Appreciating bridging loan interest rates UK
But how do bridging loans work? Along with flexibility and a higher rate of interest which means appreciating bridging loan interest rates UK, the loan is usually secured against an asset, usually a property as a first or second charge.
There’s no doubt that bridging finance has grown in popularity since High Street lenders have tightened their lending criteria and they also take much longer to approve a potential loan application.
The circumstances of the borrower will dictate whether bridging finance is good for them but they offer access to large amounts of money at short notice, which is hugely attractive to businesses, landlords and property developers.
Among the uses for bridging loans is for a landlord to develop their portfolio, give those who have poor credit and cannot access a mortgage an opportunity to buy property and for developers to renovate a dilapidated home.
Most bridging loan lenders will have a calculator available on their website to help potential borrowers appreciate what’s involved when it comes to making the application and how much the loan will cost.
Online bridging loan calculator
The online bridging loan calculator may also offer the opportunity of not making monthly payments, this is known as ‘rolled-up’ interest, so the entire amount is paid when the borrower exits the bridging loan.
Potential borrowers may also be surprised at the range of products available and the varying rates of interest – a lot depends on the value of your security property, the length of the loan and your exit strategy.
Essentially, bridging loan lenders will meet a range of needs from offering loans of several thousands of pounds up to several millions of pounds, with even the higher figure being accessible within days or weeks.
It is for this reason why businesses in urgent need to plug a cash flow issue may be attracted to bridging finance and someone with a need to pay their tax bill, for example, will also be able to access money quickly and easily if they have a security property.
Bridging loans come with various fees and costs
It’s also important to appreciate that bridging loans come with various fees and costs, in addition to the interest charges.
For example, the bridging firm may have an arrangement fee, which is usually 1% or 2% of the loan’s value, and there is also a need for valuation fees so an independent surveyor will need to be engaged and the potential borrower pays this fee.
Some lenders also have exit fees and there will also be solicitor fees so that the legal due diligence is carried out.
If you are looking to get advice about UK bridging loans, or to access this type of alternative finance, then it’s time to speak with the experts at The Bridge Crowd.
If you are interested in accessing finance quickly or want to know more about alternative finance, then these are our tips when looking for short term bridging loans.
Traditionally, bridging loans were used to bridge the gap that occurred when a property was being bought and sold within a chain but the completion dates could not be organised on the same day.
This called for a finance facility to help offer money for the short-term to complete the purchase of a new property while the funds from the sale came through.
Essentially, the reasons why short-term bridging loans have taken off in the UK include:
Bridging loans are quick to arrange
The loans are a popular way for those looking for funds to snap up a potential bargain. For example, someone buying property at auction will be reassured that the application process will be completed within a few weeks to meet the auctioneer’s deadline.
A relatively cheap option when borrowing large sums of money
If you or your business need a substantial amount of money, but only for a short period of time, then bridging finance could be the solution. In comparison to longer term finance products, bridging loans tend to have a higher monthly rate of interest, but lower set up costs.
Bridging loans are flexible
For many reasons, bridging lenders tend to be more flexible when it comes to approving applications since borrowers will need security, usually a property, for access to the money. This means many lenders may not be interested in the borrower’s proof of income or their credit history or arrears.
Bridging finance is flexible about the type of security property
Whether you have a property that is in a poor state of repair or isn’t a usual property type, including non-standard construction, then there will be a bridging lender who will consider the property as acceptable security for their loan purposes.
The bridging loan rates
However, before you even consider taking out a bridging loan, you should understand what your exit strategy will be as this will affect the bridging loan rates being levied.
This means that you will need to know how and when you will be able to repay a bridging loan, whether it’s at the end of its term or before.
One reason for this is that the higher monthly rate of interest can make them expensive if you use the loan for anything other than for meeting a short-term need.
There’s also the chance that the lender will charge renewal fees if you go over the agreed loan term.
Your exit strategy should be clear from the outset so if you know when the money will be available to repay, then this is known as a closed bridging loan.
If you do not know when the finance will be available for repaying a bridging loan, this is an open loan and they tend to attract slightly higher rates of interest.
Use bridging finance
But it’s not just for personal reasons why someone may decide to use bridging finance for meeting a short-term need. A borrower may, for example, have a large tax demand that needs paying or they may want to refurbish a property that will not attract a mortgage until it is renovated.
However, businesses can also access commercial bridging loans to cover a short-term cash flow issue or to buy help fund a large order.
Again, commercial customers will need an exit strategy in mind when it comes to repaying.
Another big attraction for bridging loans is that depending on the value of the security being offered, a potential borrower can access substantial amounts of money ranging from several thousands of pounds to several millions of pounds for meeting a pressing need.
It’s this flexibility and quick application process that has helped underpin the growing success of the bridging loan market.
This compares with a mainstream lender who may take weeks or months to process an application and then demand lots of information and possibly security before the process is complete.
One reason for this is that mainstream lenders have tightened their lending criteria and have made it more difficult to access funding for both personal and commercial customers. That’s not been the case for bridging loan lenders and while their lending criteria will vary, the process is fairly similar and much quicker than a mainstream lender will have in place.
If you would like more help and information about short-term bridging loans, then you need to speak with the team at The Bridge Crowd.
Bridging loans are an increasingly popular form of alternative finance and here we explain how using a bridging loan calculator will help you find a great deal.
Most of the websites for bridging loan lenders will have a calculator available to help potential clients decide whether this type of finance is for them and, more importantly, see clearly how much their loan will cost.
For those who may not be aware, bridging finance has grown in popularity because the loans are easier to access than a traditional loan from a high street lender.
Since the financial crash, most mainstream lenders have tightened their lending criteria but bridging lenders have different criteria and will loan on a security, usually a property.
Alongside this growth in lenders, the number of bridging finance products available in the marketplace has also risen rapidly.
Essentially, this is a type of short-term finance and they were used traditionally for bridging the gap between someone buying a property and the sale of their current property.
Short term bridging loans UK
Nowadays, short term bridging loans UK can be used for just about any reason, including raising capital before a property sale, paying an urgent tax bill or refurbishing business premises.
One of the important issues when using a bridging loan calculator is that the potential borrower will see how even a small fluctuation in interest rates will affect the monthly payments.
And since the amount that someone can borrow will depend on the security they offer, it is possible with some lenders to offer more than one security to access a larger loan.
This may be of interest to landlords with a portfolio where their equity may be spread over several properties for them to generate the equity for the loan they require.
Usually, bridging finance will be for up to 12 months, though lenders are available offering 24 months.
Use bridging loans UK for purchasing at auctions
In addition to buying property, you can use bridging loans UK for purchasing at auctions whether its commercial or residential property, expanding a business or even debt consolidation.
The bridging loan calculator will also highlight what the minimum loan amount is for that particular lender and also their maximum. These figures will range from several thousands of pounds to several millions of pounds.
The minimum term for most lenders will be one month, though it is possible to access bridging finance for as little as one day.
The bridging loan calculator is generally used as a reference tool and the actual interest rates may vary depending on the loan amount and the security being offered.
The calculator will have a number of fields for you to fill in, including the type of bridging finance you require and the length of the loan, how many security properties you have and their valuation.
You also need to bear in mind that an independent surveyor will be engaged, and you will have to pay for the service, to value the properties being put up.
Then you’ll need to complete the amount of loan that you require, the potential broker fee and there may be a lender’s fee – this is an administration charge and will vary between lenders from 0% to 2%. Some lenders also have an assessment fee.
Bridging loan lenders will have a calculator
Since most bridging loan lenders will have a calculator on their website, usually with similar fields to complete, it makes comparing the offers between lenders a tad easier and you will also understand where the charges are being made and whether there’s a fee for early completion.
Not every lender will have an exit fee but some will do.
As mentioned previously, bridging loans tend to be geared towards short-term borrowing which is why they are slightly more expensive than traditional finance.
However, they also have a quicker application process which could see money being transferred within a week or two. And if you have a previous relationship with the lender, then it could be done in a few hours or days. That compares with high street lenders who may take weeks or months to complete their loan application process.
Potential bridging loan borrowers also need to appreciate that the better rates tend to be for a ‘closed’ bridging loan application, which means that the person borrowing knows when they will have the finance in place to repay the loan.
The slightly more expensive rates are for those loans known as ‘open’ loans where the borrower may not be sure when they can repay.
If you would like more help and information about using a bridging loan calculator to find a great finance deal, then you need to speak with the team at The Bridge Crowd.
Whether you are looking to buy a property or need a short-term loan for a pressing need, then you may need to learn more about a UK bridging loan to meet your requirements.
Traditionally, bridging loans were used to help home-buyers purchase a property before they had sold their current home by offering access to money over the short term at a high rate of interest.
This then ‘bridges the gap’ between the sale of their home and the completion date of their new one.
However, since lenders can arrange bridging loans quickly, they also have proved popular for those who want to buy property at auction, for example.
That’s because a developer or a buyer can place a bid on the property knowing that they can arrange the finance in time to meet the auctioneer’s deadline.
Others may simply be needing to access a short-term loan to refurbish a property to sell on or to bring it up to a standard that will attract a mortgage.
There’s no doubt that building societies and banks have become reluctant to lend money following the financial crisis and they’ve tightened their lending criteria as result.
Bridging loan UK lenders
This has made accessing loans more difficult and there’s been a growth in the number of bridging loan UK lenders willing to offer money to those who have security, usually a property, to access cash.
Since these loans are aimed at fulfilling a short-term need they tend to have a higher rate of interest and this is usually expressed on a monthly basis.
In addition, there may be administration fees as well as the surveyor’s fees for valuing the security property to pay.
However, for those asset-rich borrowers who want to access liquid funds quickly, for example, to pay their tax bill or exploit a financial opportunity, then the opportunity that bridging finance brings will help them meet this need.
Others who use bridging loans include property investors as well as landlords wanting to develop their buy to let portfolio.
However, one of the issues when applying for a bridging loan is that you need to understand what your exit strategy will be.
The bridging loan rates UK being charged
This will also have an impact on the bridging loan rates UK being charged so you will need to know how and when you will be able to repay the money.
As an example, a property developer may be accessing funds to develop a property for a mortgage, which is when they will know how they will repay the finance.
The other big attraction is that for those who have used a bridging loan lender previously and have a good track record for repaying, can access big sums of money in just a few days.
Other applicants may see their application process take a week or two, while the lender carries out careful checks and arranges the legal paperwork.
It’s worth researching the opportunities that bridging loan lenders offer and these come in all shapes and sizes offering sums ranging from several thousands of pounds with other lenders offering tens of millions of pounds.
The criteria lenders will have will also vary with some carrying out more detailed checks on applicants than others and some may not be too bothered that the applicant has previous bad debt history.
Security property being used for the bridging loan
Obviously, a lot depends on the security property being used for the bridging loan and since most lenders will offer a maximum LTV of 75% on the gross loan amount that the applicant can borrow means the total amount will be restricted by the property’s value – which is assessed independently.
As mentioned previously, bridging loans tend to be over the short term so you can access large amounts of money for anything between one month and up to 24 months, depending on the lender’s criteria.
Most lenders will offer up to 12 months, though you can repay the loan early and most lenders do not charge an exit fee when doing so.
Bridging finance firms will have an online calculator
It helps too that most bridging finance firms will have an online calculator to help you work out whether this type of alternative finance is for you and whether it will meet your needs.
The calculator will look at the type of bridging loan, the term and the value of the security property along with the loan amount. All the fees will also be listed.
The rate of interest will vary depending on the amount being requested and the value of the security property as well as the applicant’s circumstances.
While the bridging loan calculator is a useful tool, there may be other issues you need to discuss and the team at the BridgeCrowd can help you understand more about accessing a UK bridging loan.
That’s because bridging loans are a short-term finance offering to suit an applicant’s circumstances, so the lender’s criteria will dictate how much interest they will charge.
Typically, bridging loans are being used by people buying property to help ‘bridge the gap’ between selling their current home and then completing on the purchase of their next.
The loans work by enabling homeowners who may be struggling to find a buyer to move into their new home before selling their existing one.
However, since the credit crunch which led to banks tightening their lending criteria, bridging loans in the UK have grown quickly in popularity.
One reason for this is that the lenders don’t have similar lending criteria and will arrange a loan that ranges from several thousand pounds to several millions of pounds in just a few days.
This will depend on the security being used by the bridging loan applicant for accessing the money.
Bridging loan interest rates UK
Essentially, the size of the loan will dictate the bridging loan interest rates UK that a lender will charge and the value of the security will also have an influence.
The duration of the loan may also affect the rates and borrowers also need to appreciate whether they are applying for a ‘closed’ or ‘open’ bridging loan.
The difference between the two terms is that the applicant knows when they will be able to repay the money, which will be known as a closed loan, whereas for those who do not know then their bridging loan will be open.
For example, for those who are using a bridging loan to buy another house, they will know that when they complete on their current home sale then they’ll have the money to repay the bridging loan.
For those who do not know when the money will be available for repaying their loan, then they will have to find the money when the loan’s term comes to an end, this is usually for 12 months but some lenders will forward money for 24 months.
The purpose of the loan will also vary and while most applicants will be buying property, particularly landlords boosting their portfolio and developers buying a property at auction, other borrowers have used the quick application process for other purposes.
These may include having to settle an unexpected tax bill quickly and refurbishing business premises or even buying stock for a sales promotion.
Shopping around to find bridging loan rates UK
The restrictions, if any, will be detailed by the bridging loan lender and it’s always worthwhile shopping around to find bridging loan rates UK that suit you and your needs.
When it comes to understanding bridging loan rates, it will become apparent that the interest rates will be much higher than a high street bank will charge, for example.
That’s because the loan is for the short-term and usually the interest rate is expressed as the rate per month.
There may also be an administration fee to pay as well and some lenders will have an exit fee when the loan falls due – not all lenders will charge an exit fee.
A potential bridging loan applicant will also need to understand variable and fixed rates, since just like a mortgage, bridging loan rates offer different interest rates too.
A fixed rate for the loan means the lender will apply the same interest rate across the loan’s term, so your monthly repayment will be the same.
Opting for a variable rate bridging loan
For those opting for a variable rate bridging loan, then the interest rate may change during the loan’s term and the payments could change along with it.
Another influencing factor on the interest rate will be whether the lender has a first or second charge on the security property.
The better rates will be for those offering a first charge, which means the lender will be first in line to be repaid when the security property has to be sold, whereas dearer rates may be levied on a second charge security property.
If you are looking for a UK bridging loan then you may realise that there are no comparison sites for these since the loans are tailored for a specific purpose and the applicant’s financial situation.
If you would like more help and information about bridging loan rates and what you can use the finance for, then it’s worth contacting the friendly team at the BridgeCrowd today.
The most important aspects when considering bridging finance is to understand what these loans are and what they will cost which is why most lenders will offer a bridging loan calculator to help.
While the calculator will explain the costs involved, for complex situations you should really speak to a bridging loan expert first.
In a nutshell, bridging finance tends to be a short-term loan with the money being used for a wide variety of purposes, though many borrowers use them for buying property.
Indeed, most people may have heard of the term when buying their home and they may have needed bridging finance because the proceeds from selling their current home have not arrived in their bank account – so this finance offers a ‘bridge’ between needing to a buy a new home and having the sale proceeds available for the purchase.
The bridging loan can be secured against a suitable property, whether it’s commercial or residential, or other assets, including land.
It’s also important to appreciate that the amount that you can borrow with this type of finance varies too with some lenders offering a few thousand pounds and others offering up to several million pounds.
Short term bridging loans UK
However much money you need to borrow, you will need to understand that short-term bridging loans UK are usually secured against the asset which will dictate the loan to value, known as LTV.
Also, when looking at using a bridging loan calculator you need to know how you will be repaying the finance before applying.
The usual methods for repayment will include selling a property, receiving money or refinancing to a longer term financial product, such as a buy to let mortgage.
The bridging loan calculator will also have the length of time that you need the money for and the rate of interest that will be charged.
This is where knowing how you will repay the money may be important because for those who know when they can repay the loan may enjoy lower rates of interest.
Also, since bridging finance is designed as a short-term loan, a bridging finance calculator will help calculate the likely costs involved.
Along with administration charges, there will also need to be a surveyor’s fee for valuing the security asset and potential legal fees as well.
Some firms also charge an exit fee when the loan comes to an end or if you repay the loan early.
Finance firm offering short-term bridging loans
Not every finance firm offering short-term bridging loans will charge exit fees, so you could save money by shopping around to find a different lender.
The calculator will also have the arrangement fee, which will range from 0% to 2% of the loan’s amount. Obviously, for larger amounts of borrowing, this can be a significant figure and you may find cheaper deals elsewhere.
The calculator will then reveal how much the loan will cost, including the total interest that will be charged over the loan’s course.
Some bridging finance lenders may also offer the opportunity of not making repayments until the loan falls due which means the interest is ‘rolled-up’ and the loan will be paid in full on an agreed date.
As mentioned earlier, bridging finance is a short-term funding solution but it’s growing in popularity because the lending criteria is not as restrictive as high street banks and building societies have imposed.
In addition, bridging finance is quick to arrange and if you already have a relationship with a lender then it can be done in just a few hours. Most applications will take several days to arrange and some may take a few weeks.
This type of finance is a popular choice for property developers, particularly if they want to buy property at auction and need to arrange finance quickly.
Bridging loans can be used for other purposes
However, bridging loans can be used for other purposes as well with firms using the money to refurbish premises, for example, while others may have a personal bill they need to pay quickly.
Competition in the sector has also increased with a range of lenders offering a wide variety of interest rates and sums to borrow and most will have a bridging loan calculator on their website to help potential applicants.
If you have any questions about a short-term bridging loan or would like more information on how to use a bridging loan calculator, then you should speak with The Bridge Crowd team.
While bridging finance has grown in popularity with borrowers, you may be asking: ‘Is a UK bridging loan for you?’ Here, we will explain more to help you understand what these loans are and what they can be used for.
Firstly, bridging loans can be used for practically any purpose, though they tend to be more popular with property developers and landlords including those who want to buy a property at auction.
That’s because there’s a deadline when buying property with an auctioneer and a bridging finance firm can provide the loan required in days or just a few weeks to complete the purchase.
Bridging loans have proved to be popular with buy to let landlords and developers who can borrow money quickly to bring a property up to a condition that would attract a mortgage.
However, in recent years a trend has been growing among borrowers to use this type of finance in meeting a wide range of needs; some are also viewing these loans as an alternative to mainstream borrowing. Business may use the money to buy stock for a promotion while others may use bridging finance to pay an urgent tax demand, for example.
One reason for this is that banks and building societies have tightened their lending criteria so it’s more difficult to access funding, particularly if your credit history is an issue. Your credit rating is not a problem for many bridging finance lenders since they will loan money against an asset being used as security, usually a property.
UK bridging loans
For anybody considering UK bridging loans then you will need to understand what your exit strategy from this type of loan will be.
For example, if you are buying a property, will you be selling it to repay the lender or hoping to attract a buy to let or mainstream mortgage once you have refurbished it?
This exit strategy is an important undertaking because you will need to know how and when you are able to repay the loan since most lenders will offer a 12-month bridging finance term but there are some firms offering up to two years.
Bridging finance is a popular way to borrow money over the short-term but it can be a more expensive alternative to borrowing from a high street bank, for example.
Another incentive for understanding your exit strategy is to enjoy lower interest rates on the amount you borrow.
This is because a lender will offer cheaper rates for those borrowers who know when they will repay the money and this is known as a ‘closed’ bridging loan.
Repay their bridging loan UK
For those borrowers who may not know how and when they’re going to repay their bridging loan UK, then this is called an ‘open’ bridging loan and will attract slightly higher rates of interest.
However, what rate of interest a lender will charge will vary depending on their own lending criteria and your circumstances.
The value of the property being put forward as security will also have an influence on the amount being borrowed and the rate of interest being charged.
To help potential borrowers, particularly those who have never accessed this type of alternative finance previously, it’s a good idea to use a bridging loan calculator.
Most of the bridging lenders will have this facility on their website and you fill in a few details such as the amount you want to borrow, the term of the loan and the calculator will reveal how much the loan will actually cost.
In addition to repaying the money, there will also be administration charges for completing the loan and an independent surveyor will need to be paid for valuing the property being used as security.
The application process for a bridging loan is straightforward
The application process for a bridging loan is straightforward and quick to complete and while most high street banks will take many weeks or months to complete on a loan, bridging finance can be arranged in just a few hours – if you already have a relationship with the lender.
Otherwise, bridging finance can be completed in just a few days once the surveyor’s work is done and the legal side completed.
There’s no doubt that this can be a complicated process for those who may not understand what bridging finance can be used for and if you want to know whether UK bridging loan is for you, then it’s a good idea to contact the experts at The Bridge Crowd.
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.