If you need to secure financing within a short period of time and have something that can be used as security then you may benefit from a bridging loan. These loans can be used for a number of purposes and make it fast and easy not only to buy property, which is the main use of these loans, but also to avoid cash flow problems.
What They Are
Bridging loans are short-term loans that use property as the collateral for the loan and allow the borrower to complete a transaction while they still have to wait for another to be finalized. By using commercial property, land, or residential homes as collateral, you can easily get the money that you need using a bridging loan.
One of the main benefits of this type of loan is how quickly you can close and get the money that you need. While you can often receive verbal confirmation of your approval on the same day as your application, you generally won’t get the funds before five working days, which is still a lot faster than other types of loans.
Who Can Benefit from Them
Anyone who is looking to buy property and needs to have access to the funds quickly will benefit from a bridging loan. This allows borrowers to buy property at an auction and even to avoid a repossession. Other times you can benefit from a bridging loan include when you need to pay more for your taxes than you originally thought, want to develop property and need the funds to do so, or if you are buying property to let it. Because they can be secured against property that is in need of restoration or repair, you aren’t limited to what kind of property you can use as collateral. Additionally, bridging loans can use multiple properties as collateral, which makes this kind of loan ideal for landlords.
Criteria for Obtaining a Bridging Loan
All applicants for bridging loans have to be at least 18 years old. Unlike other types of loans where the credit and income of the borrower are important, with bridging loans this is not a factor and evidence is not required. Other lending criteria include an exit route to plan for how the loan will be paid back, property that meets collateral requirements, and an agreement to a minimum and maximum term. The loan has to be more than £50,000 and has a term limit of 24 hours to 36 months.
The amount that you can borrow will depend on the value of your property as well as its type.
What Happens When the Loan is Due
It’s important that you have planned and prepared for how you are going to pay back your loan. This is one of the first things that lenders will ask you when you inquire about a bridging loan. Most of the time borrowers sell the property or refinance the loan into a different type of financing. Other ways to pay back the loan include with inheritance, selling additional property or assets, or an insurance policy maturing.
With the right planning and information, bridging loans offer a fast, convenient, and easy way to get money that you need using property as collateral. The rates will depend on your credit rating, the loan-to-value, and what kind of security you have. Working with a skilled broker will ensure that you get the best rate and repayment plan possible for your bridging loan.
This article was brought to you from BridgingLoans.co.uk.