Why Would You Use A Bridging Loan

Bridging loans have become popular among borrowers all across the UK due to the benefits and covering a broad range of situations. It is a short-term funding solution with many benefits, such as fixing broken property chains or providing funds to expand the property portfolio. Despite these benefits, borrowers may ask themselves: Are bridging loans a good idea for taking out specific property plan? 

To answer this question, it is necessary to elaborate on bridging loan benefits. Both individuals and businesses can use bridging finance to meet their financial obligations. It helps you avoid lengthy waits as in mortgages and also reduces the risk of losing your favorite property to another buyer. 

Here are some beneficial characteristics of bridging loans that will help you understand why this option is worth considering.  


Speed Of Arrangement    

The most significant reason why people turn to bridge finance is its speed. Applying for a standard property loan or mortgage can take months to get approval, and you may lose a time-limited opportunity, such as purchasing property at auction. On the other hand, bridging lenders usually approve your loan application within two days, and you will get funds as soon as possible. It means you can quickly complete property purchases and mitigate the risk of being stuck in a long property chain.


Flexibility

One of the key benefits of bridging loans is their flexibility. Unlike bank loans or traditional mortgages, bridging loans do not have fixed or strict eligibility criteria. It means it can allow borrowers with different financial circumstances to get funds and fulfil their needs. Both individuals and companies can take out this type of loan to overcome financial issues. In addition, bridging lenders accept all types of properties commercial, residential, semi-commercial and even land or non-standard properties. Most p2p investments offer tailored loans to meet the needs of borrowers. For example, it can be used to: 

  • Clear adverse credit and improve credit score. 

  • Overcome business cash flow issues, purchase new equipment, pay wages or restock.

  • Purchase a property before the sale of the existing one or bridge the financial gap when you are waiting for long-term financing. 


Easy Repayment 

Unlike traditional mortgages, bridging finance comes with unique lending terms. Bridging lenders offer you the option to repay interest rates monthly or at the end of the loan term. If you have monthly cash flow issues, you can choose to pay interest when loan terms end. It makes bridging finance easier to manage than other borrowing forms. 


Bridging Loan Help To Get Profit From Property 

You may read multiple articles about bridging loans that describe avoiding problems, but there are real upsides to this funding source. 

If you choose an experienced and well-reputed lender, you can get the right transaction at the right time and make bridging loans highly profitable for you. If you want to sell a property but it is not in good condition, you have to sell it below market value. A bridging loan can provide you funds to renovate the property before sale and increase its value.    

Bridging loans allow you to take funding for projects that would otherwise be unavailable. You can complete tour development projects with bridging finance and make a profit by selling a newly developed property. 


Reliability

When there are tight deadlines, a reliable funding option is key to meeting these deadlines. This is where a bridging loan comes in. Due to the speed of arrangement, a bridging loan is used to secure quick property purchases, whether commercial or residential. It is highly beneficial when you are purchasing a property at auction. 


Auctions usually have tight deadlines. If you win a bid, you have to pay a 10% deposit at that time and the remaining amount within 28 days. If you apply for a mortgage, securing funds will take a long time. On the other hand, bridging loans provide quick access to funds and help you complete purchases at auction. You can repay the loan amount after getting access to long-term financing. 


Bridging Loans Prevent Financial Losses  

Bridging finance can also be used to prevent financial losses in different situations. For example, if there is an unexpected utility bill or a pending tax bill, that can adversely affect your credit profile. You can use funds from bridging loans to pay these bills. Any adverse credit that adds to your account can result in a high cost of borrowing, or even you may be unable to borrow in the future. 

    

In addition, if you fail to repay your mortgage, the mortgage lender may repossess your property. In such a situation, you can take a bridging debt, repay mortgage instalments and prevent your home from repossession. This way, you can also have some time to sell your home at a better rate than your mortgage lender. 

Is Bridging Loan A Good Idea? 

From the benefits described above, you can get an idea that bridging loans are useful in different circumstances. You can take out a loan within a short period, and bridging lenders do not interfere with the purpose you are using these funds for as long as you are able to repay the loan. However, the eligibility criteria and interest rates vary from lender to lender, so you must find a lender offering competitive rates.  


Conclusion 

When it comes to taking out short-term finance, such as bridging loans, it is important to shop around and compare different options to understand the product and find the best lender. You can take out a loan directly from a bridging lender, through a broker or from a p2p lending platform. 


Although it offers numerous benefits, from providing funds for property purchases to overcoming business cash flow issues, you must remember that residential bridging lending UK comes with a high-interest rate. Take time to decide the amount you want to borrow and for how long. We suggest you borrow an amount that you can easily afford to repay. Otherwise, you may find yourself in a never-ending debt cycle.


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