Bridging loans have thousands of potential applications, though are particularly popular among property developers. But what is it about bridging finance that makes it such a versatile and popular form of development finance?
- Bridging Loans Are Fast
One of the biggest advantages of bridging finance is the speed with which the required funds can be accessed. From application submission to the completion of the transfer, the whole transaction can take as little as five working days. Ideal when dealing with time-critical situations, or looking to capitalise on an investment opportunity before a rival beats you to the punch.
- Bridging Loans Are Affordable
The actual interest rates of a bridging loan will always vary significantly from one product and lender to the next. However, it’s not uncommon for bridging finance to be offered at a rate of less than 0.5% per calendar month. Given the requirement for most bridging loans to be repaid within around six months or so, this adds up to highly competitive overall borrowing costs. Far more affordable than a longer-term secured loan, such as a mortgage.
- Bridging Loans Are Flexible
By flexible, we mean bridging loans can be used for almost any legal purpose whatsoever. Property purchases, property developments, property renovations and so on – all quickly and affordably covered with a bridging loan. Just as long as sufficient collateral can be provided to cover the cost of the loan, the applicant’s intentions for the funds are of no consequence to the lender.
- Bridging Loans Are Easy to Arrange
Eligibility for bridging finance is typically established exclusively on the basis of collateral. In turn, applying for a bridging loan can be surprisingly straightforward. Particularly when working with an independent broker, who can handle the complexities on the applicant’s behalf. Simply assess affordability by using a bridging loan calculator, reach out to an established broker and complete the application process in minutes.
- Bridging Loans Don’t Exclude Poor-Credit Applicants
Most leading bridging finance specialists in the UK don’t base their decisions on credit checks. In fact, a sizeable proportion of the bridging community doesn’t carry out credit checks at all. Again, this is due to the fact that eligibility is usually determined on the basis of collateral. If the borrower is able to provide sufficient security to cover the costs of the loan, it’s considered a low-risk transaction on the part of the lender. The applicant’s credit score at the time being of little to no relevance.
- Bridging Loans Are Perfect for Auctions
Property investors and developers aren’t usually sitting on huge cash reserves. Hence, when an unbeatable property purchase opportunity presents itself, they rely on third-party funding. A prime example of which being the purchase of a property at auction, wherein the successful bidder is expected to come up with the cash within a matter of days. Rather than losing out on the opportunity of a lifetime, bridging loans can cover the costs of an auction property purchase at an affordable price.
- Bridging Loans Can Be Repaid Early
Last up, the general rule of thumb states that if you can repay a debt early, you probably should. With bridging loans, there is typically a clause in every agreement that allows for early repayment, without facing heavy penalties. In fact, repaying a bridging loan earlier than agreed can often reduceoverall borrowing costs significantly. Another reason why bridging finance is so popular among property developers, who for any number of reasons may find themselves able to repay their loans earlier than expected.
Article by iConquer