Do you have an immediate need for cash for a short period of time? Do you need to come up with money right away or else lose the dream house that you have always wanted? Or is it hard for you to obtain a traditional loan because you work as a freelancer or because you have poor credit history? If you are one of these people, bridging loans can be the perfect solution for you.
This type of loan, which is specifically created to help people bridge financial gaps and provide cash to those who need it immediately, is widely available. But of course, before you rush out to a lender and submit an application for bridging loans, there are a couple of things you need to know about it that will help you make an informed decision in this area.
Here are the top 10 things you need to know about bridging loans:
1. Bridging loans are more expensive than traditional loans in terms of interest rate. Because of its short term, bridging loans charge higher interest rates. Therefore, if you do not desperately need the cash, it is smart to consider your other options like a traditional loan or renting, which in the end can be a cheaper choice for you. If not, go with bridging loans.
2. You have a choice between the two types of bridging loan: the closed bridging (defined only for a period of time) and the open bridging (as the name suggests, is the more open-ended option). Open bridging gives you more freedom than closed bridging but it is certainly more expensive because it charges higher interest rate.
3. Bridging loans can amount from £30,000 to £10million. The amount you can borrow typically depends on the market value of your property. Lenders usually give 85% of the property value.
4. Lenders that offer bridging loans are more concerned with the type and quality of the property you are buying since this is what you will be using as collateral. The income and credit history of the borrower is usually not a major concern, which is good news for people who are self-employed and those who have bad credit history.
5. To increase the amount offered to you by the lender, you can also use your other properties as collateral.
6. Bridging loans take only about hours or a day to be approved and can be completed in less than a week.
7. The standard term for paying bridging loans is usually six months. Of course, it can be shorter or longer depending on the lender.
8. You can use business equipment, commercial or residential properties as collateral. Just be sure that the properties you intend to use as collateral are in top shape and quality to increase your chance of having your application approved.
9. Talking to an independent mortgage advisor can be a great help especially if you are new at this field.
10. It is important that you get a bridging loan if and only if you are definite that you can repay it within the time allotted. Otherwise, forget about applying for it. Bridging loans can be a very useful option for many people.
Just be sure that you equip yourself with sufficient knowledge on this area not only for you to get the best deal but also to save yourself from a lot of headaches.
About the author:
Simon Harvey is an experienced writer in UK personal finance issues. He is a staff writer for Insurance Sorter in the UK. Get more information regarding home bridging loans UK. |
