What Is a Bridging Loan and When It Is Required?
Posted by james on March 24th, 2017
What is a bridging loan? It is a short term loan ranging from two weeks to three years availed from lenders to purchase assets such as property that need immediate payment till the primary credit line is obtained such as a long term loan. Why it is named so, because it bridges the gap between the date of purchase of the property and the arrival of the main loan arranged from other financial institutions. It is an interim measure taken under pressing circumstances such as a property coming cheap, but may go out of grasp if the transaction is not finalized immediately. However these kinds of loans are usually costly as the charge of interest will be higher compared to the conventional loans obtained from banks and financial institutions.
The bright side of the loan is that it gives you immediate relief till arrange a permanent one and at the same time you also achieve your goal of buying a property on which you have set your mind. The interest rates for the bridging loan will be starting from 1.5% per month or an annual rate of 18% which could be stiff to payback but the loan has helped you to resolve the immediate financial requirement so it should be a good one for you. The loans are processed rather quickly and without little documentation which greatly convenience the borrower as the need is urgent. However the loan could eat up your resources if you do not tread carefully and the possibility of you getting a main line credit may be put in jeopardy. You must obtain the loan from recommended sources and the FCA approved broker will be the right party to conduct for advice.
These are desperate measures taken by people needing immediate loans and are much suited to property developers, landlords and people interested in buying auctioned properties. People with rich assets or belonging to the affluent society are the other group that need straightforward financing for buying real estate properties. However it is advised that to opt for the bridging loan when you need to invest on property, develop or buy properties for letting out on rents.
