Life is uncertain and you may need money anytime.
If you are into property development or investment business, this situation becomes very alarming.
There will be several moments in your business where you will require quick and easy access to cash in order to complete the projects.
Bridging loan helps you with short term funding. Its process is easy and the cash can be arranged in a short time. Bridging loan saves you from lengthy documentation and tiring application process. This loan is offered for a time period of around 1 to 12 months.
Why does a person need Bridging Loan?
There are several reasons for which one may require quick access to money. As said above, bridging loan is the best solution available in such situations of emergency. In most of the cases, bridging loan is offered in property development or investment cases.
Below mentioned are the situations where the bridging loan is required.
- If a person has a property chain business – When you are engaged with another property and one more sale of property takes place, bridging loan can help you here. It backs you up in purchasing so that you can have enough time for arranging the next exit.
- If an existing creditor is putting pressure on you – If you have an outstanding to be paid but you have got no money at the moment, you should apply for bridging loan. You can easily save the equity from court fees.
- If you want to invest in any property – If you are planning to invest in a property for either its development or for refurbishing purpose and need money, bridging loan can be a great help.
- If you are planning to bid on the property at an auction – You can take advantage of bridging loan if you don’t have money but want to bid on a property. The auctioneer will be confident about you regarding the funds.
Open Bridging Loan vs. Closed Bridging Loan
There are two types of bridging loans. One is known as closed bridging loan and the other is known as an open bridging loan.
In an open bridging loan, the source of repayment is less clear. Also, the timing of the loan repayment is not clear properly.
In a closed bridging loan, everything is clear. The exit plan is defined and the timings are also known. Most of the lenders prefer closed bridging loans only due to certainty.
Is there any regulation over Bridging Loans?
Talking about bridging loans, there is no regulation for buy to let landlords and property developers.
There is no regulation in such situations since the commercial lending is a different subject matter which involves separate assessment criteria.
The repayment of the loan depends on the project’s rental potential or development value. It has nothing to do with the household earnings of the borrower.
What will be the cost of Bridging Loan?
To understand the cost of bridging loan for your requirement, you can use the bridging loan calculator of Finanta. Generally, the price of the loan is defined as per the risk which the lender beholds.
It further includes the revenue which is required for generating the profit.
Since bridging loan is offered for a short time period only, the income generated from the loan interest is small. That’s why one will find the interest rate along with the arrangement fee. Along with these two, you may get to find some legal fees, security fees, valuation fees, etc.
Generally, a person in the UK applies for bridging loan for residential or commercial purpose.
The bridging loan calculator of Finanta helps you know the complete amount of any facility easily.
When it comes to offering the bridging loan, every lender first checks the credit history of the borrower.
If you have a good credit history, you will easily be able to secure the agreement.
The process of the agreement for the bridging loan is generally calculated in weeks only.
It is not calculated in days. As per the process, the first step is to agree with the terms in the principle.
This can take place in a few days. After this, the next step is to finish the security and valuations process.
The borrower is required to process with security agreements so that later the lenders may release the money.