A bridging loan is a type of short term loan that helps people or businesses until they secure permanent funds or finances. Selling a home and buying a new one at the same time can be tricky. Sometimes it takes a longer time to sell the existing house, and you have to wait for the money to purchase new property. With a bridging loan, you can get funds readily available and complete the new property purchase. You can return the loan amount after the sale of your old home. Here in this article, you can find all the necessary information about the bridging loan.
What Is A Bridging Loan?
A bridging loan is used to bridge the financial gap between buying a new home while waiting for the sale of an old one. It allows borrowers to meet the obligations by providing them with immediate h flow. You can not get a mortgage before the sale of your current home, and here you can consider a bridging loan to cover your finances. Bridging loans are of two types that are open bridging loan and closed bridging loan. An open bridging loan has a fixed repayment date, while a closed bridging loan has no fixed repayment date, but you usually have to pay it within a year. You can take one that is suitable for you. However, you must have a backup plan if your repayment strategy fails.
How To Get A Bridging Loan?
There are many financial service providers and brokers in the UK offering bridging loans. It is more easy and quick to get a bridging loan as compared to the mortgage. Most providers have online websites where you can apply online for a loan. The lender will ask you for some necessary information and check your credit history, mortgage commitments, and the current home’s value and the home you want to purchase. If you meet the eligibility criteria, your loan will be approved, and you can get access to cash usually within hours or the next working day. However, you must keep in mind that these loans have high-interest rates and origination fees.
Uses Of Bridging Loan?
A bridging loan is usually used to complete the purchase of a new home while you are waiting for funds to become available by the sale of the current home. But it can be used for some other purposes, including:
Property Refurbishment
Many people want to refurbish their property to increase the value before the sale. A Bridging loan can cover this cost, and you can return the amount after the sale of your property.
Buy Property At Auction
Auctions are a great opportunity, and after winning a bid, you have to pay a 10% deposit that day. Mortgages are too slow and unsuitable to buy a property at auction. With the help of bridging loans, you can get quick funds, and it will help you buy a property at auction.
Solve Business Cash Flow Issues
Cash flow problems can arise in business due to many reasons such as late payment from customers, purchase of new equipment and unexpected tax payments. You can use bridging finance to overcome such problems.
Repossession prevention
If your property is at risk of repossession, you can use a bridging loan to pay your debts. In this way, you can retain control of your property and can avoid the forced sale situation.
Besides these uses, bridging loans can be used for property development, business ventures, buy-to-let investment, capital raises for future projects and divorce settlements.
Bridging loans offer you quick funds that you can use to fulfill your current financial needs. However, it may not always be the right choice for your circumstances so you must consider its alternatives before making a final decision.
Read More: How to find the right short term cash loans online
