Bridging loans are very effective and affordable options for those looking for a gap-filler in the category of finance. Here, you can find out exactly what a bridging loan is and the options available to you.
Bridging Loans: What Are They?
A bridging loan is a loan amount provided by a specialist lender such as uk bridging loans, with the aim to ‘bridge the gap’ between the need for a purchase, and the time required to wait before you have the funds available. It’s a good solution for those who know they will have the full amount in a short space of time, but they need the money now in order to make an important purchase or investment. Bridging loans are built more upon the basis of narrowing the time frame regarding access to funds, rather than providing money for those who don’t currently have any or need financial aid. With this in mind, bridging loans are more popular for large scale investments such as property, rather than small loans for everyday lifestyle needs.
What is a Bridging Loan Used For?
Where bridging loans are most popular with property development, they can also be used for a variety of reasons, including:
- Buying a property
- Buying a property at auction
- General property development
- A buy to let property investment
- General business ventures
- Divorce settlements
- Tax bill payments
Who Can Take Out a Bridging Loan?
Anyone can take out a bridging loan, as long as they have the financial means to do so. This largely depends on a high amount of collateral to offer security for the loan. Due to the high value, bridging loans are most commonly taken out by business investors or domestic individuals looking for a large scale purchase such as a property.
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How Can a Bridging Loan Be Repaid?
Bridging loans, unlike other loans, are not paid based on monthly installments over a period of time. They are repaid in full, as soon as the full repayment amount is available to you. This is why bridging loans are a popular choice for those simply awaiting a large financial figure to clear, such as in a settlement or in property purchase. This means that when the figure is cleared, the full amount of the bridging loan can be repaid in bulk.
How Much Can You Borrow, and What Does It Cost?
Bridging loans often deal in very high amounts, ranging from a few thousand to totals of millions of dollars. How much you can personally borrow depends on the value of collateral you can offer in order to take out the loan. During the application process, lenders should provide a maximum amount figure you can borrow based on your circumstances.
Furthermore, you are also expected to pay interest rates and fees during the course of a bridging loan. These fees are usually more manageable than traditional loans due to the short-term basis and the avoidance of interest building up over a manner of years. The repayment of interest is generally very flexible, with different options available.