A bridging loan is a short term debt that can be used for a number of purposes. The property developers and investors usually use it to complete the property purchase, renovate a house or purchase a property at auction. However, you can take it for any purpose, such as overcoming your business cash flow issue, debt settlement, and fulfilling many other financial needs. Due to the flexibility and ease that bridging finance offers to the borrowers, it is becoming popular day by day. As a result, the number of bridging loan providers is also increasing.
Here we are describing the top five benefits of bridging finance to help you understand why bridge loans are becoming a popular funding source.
One most significant benefit of bridging finance is that it is arranged within a small period compared to the other forms of funding, especially mortgages. For example, when you apply for a mortgage, it can take months to complete the process of application, approval and getting funds. However, in bridging loan, all the processes from the application approval to transfer funds to your accounts are typically completed within two weeks. This speed of arrangement makes it an ideal solution for individuals who need funds quickly, such as when there is an opportunity to purchase a property below market value at auction.
Pros and cons of bridging loan:
Pros and cons of bridging loan
The lending criteria of bridging loans is flexible compared to standard bank loans and traditional lenders. Each application is assessed on its own merits. Bridging lenders are not specifically concerned with the credit score of the borrowers. If you have a good exit strategy, your loan application will likely be approved. Most lenders are flexible about the credit history, affordability and proof of income and are willing to offer loans to those who have low credit scores. A strong exit strategy will always help you to get quick approval and access to funds. Bridging loan eligibility criteria help you to understand that how your requirements will meet .
Most traditional lenders and banks are specific about the purpose of debt. But you can take bridging finance for almost any legal purpose. Lenders receive limitless applications, including:
Raise business funds
Funds for refurbishment and renovation
Purchase property at auction
Funds for property development
Break a chain
Purchase buy-to-let properties
Purchase a land
To get a mortgage loan, you need a standard property to use as security, but you can use any type of property from residential to commercial and undeveloped lands as collateral against bridging debt. You can also use a property that is in poor condition, needs renovation, non-standard construction property and uninhabitable property.
Bridging funds are types of short-term debts usually taken out for 12 to 36 months. The interest rate is charged monthly, but the lenders offer you different options to repay the interest. You can repay interest monthly or at the end of the loan term. This flexibility makes it easier for you to manage the loan repayment compared to long term debts.
We hope that now you understand the benefits of bridging loans and can make a better decision whether you should take out such debt to fulfil your needs or not. It is a fast and quick source of funding, allowing borrowers to get a loan easily compared to mortgages or other traditional loans.