Bridging loans explained

We all experience a shortage of cash from time to time, whether it is due to unexpected circumstances or you simply need to fund a large purchase. If you are in this situation, you may be considering taking out a bridging loan – but what exactly does this entail?

Secured against a property, bridging loans are short-term financial deals that are often used to provide a little extra fiscal stability when moving home. For example, if you have purchased a new property but your house is taking longer than expected to sell, this kind of credit can tide you over until a sale is closed.

However, bridging loans can be used to stem a variety of financial situations. From important events such as weddings to unexpected circumstances like unemployment, this type of financing can be used to ease any monetary pressures you may have.

Indeed, such loans can also be used for commercial purposes, which could be good news for those running their own business.

Before deciding if they are for you, seeking some bridging loan advice from a professional is advisable. There are many factors to take into account prior to selecting your loan – from determining if you are eligible for this kind of credit, to ascertaining whether it will suit your individual situation.

First and foremost, to apply for a bridging loan you need to be a homeowner. This is because they are secured against a property.

People with all kinds of credit history can apply, so if you have been turned down for other loan types, you may find you are successful here. However, if you are currently bankrupt you will not be eligible for a bridging loan.

The next thing to consider is how you will pay back the loan. While your provider may be able to be quite flexible in terms of repayment periods, you must carefully calculate how soon you will be able to clear your debt – taking additional costs such as monthly interest into account.

As well as the accrued interest, you will need to think about taking care of administration and legal fees too.

Bridging loans typically last between one and six months, but they can continue for as long as a year. Repayment terms are flexible, with some companies allowing you – rather than them – to determine when you will clear the sum.

This kind of financing may particularly appeal to you if you need to access some additional funds in a hurry. A response to your application could be received within as a little as 24 hours, with the deal itself being arranged within five days. So, you could benefit from a fast, clear picture of your finances.

When selecting a bridging loans company, make sure you thoroughly research your options and choose a firm you trust. Among the points to look out for are organisations regulated by the Office of Fair Trading or other official bodies.

And before deciding to take out this type of credit, be sure to speak to a professional to be clear on all your options.

If you're seeking a short-term loan to move up the property ladder, fund a large purchase or simply to tide you over during a difficult period, a bridging loan can provide a fast, effective and helpful solution.