Why Would You Choose Bridging Loan Over Standard Bank Loans

Borrowers in the UK increasingly opt for bridging loans because of their versatility and advantages in various scenarios. These short-term loans can help resolve broken property chains or fund portfolio expansion. However, borrowers may wonder if bridging loans are suitable for their particular property plans.

In order to provide a comprehensive answer to this query, it is important to delve into the advantages of bridging loans. These loans are available to individuals and businesses and can help fulfil various financial obligations. Bridging loans can be a viable alternative to mortgages as they offer quicker processing times and minimize the risk of losing your desired property to a competing buyer.


To help you assess the suitability of bridging loans UK for your needs, let's explore some key benefits of this financing option.


Speed Of Arrangement

Its rapid processing time is the primary factor driving people to consider bridging finance. Traditional property loans and mortgages can take months to secure approval, potentially causing you to miss out on time-sensitive opportunities, such as acquiring a property at an auction. Conversely, bridging lenders typically approve loan applications within two days, providing you with funds as soon as possible. This expeditious approach lets you promptly finalize property purchases and reduce the likelihood of being caught in a protracted property chain.

Easy Repayment 

Bridging finance differs from traditional mortgages in terms of its lending conditions. Bridging lenders allow borrowers to pay interest rates monthly or after the loan term. This flexibility allows borrowers to opt for interest payments at the end of the loan term if they encounter cash flow problems every month. This approach makes managing bridging finance more convenient than other forms of borrowing.

Flexibility 

Bridging loans offer considerable flexibility, one of their most significant advantages. Unlike traditional mortgages or bank loans, bridging loans do not have rigid or inflexible eligibility requirements. Borrowers with diverse financial situations can secure funding to meet their needs. Both individuals and businesses can benefit from this type of loan to overcome financial challenges. Furthermore, bridging lenders accept various property types, including commercial, residential, semi-commercial, land, and non-standard properties. Most bridging lenders offer customized loan options tailored to suit borrowers' specific needs.

Bridging loans can be utilized for various purposes, such as:

  • Resolving adverse credit issues and improving credit scores.

  • Addressing business cash flow problems, including purchasing new equipment, paying wages, or restocking.

  • Facilitating the acquisition of a property before the sale of an existing one or bridging the financial gap while awaiting long-term financing.

Reliability 

Access to a reliable funding source is crucial when tight deadlines are involved, which is where bridging loans can be highly advantageous. Their rapid processing time makes them an ideal solution for quickly securing commercial or residential property purchases, particularly when buying property at auctions.

Auctions typically have stringent deadlines, requiring the winning bidder to pay a 10% deposit immediately and the remaining balance within 28 days. Seeking a mortgage or traditional loan could take too long to secure funds, making bridging loans a more viable option. With a bridging loan, you can promptly obtain the necessary funds and complete the property purchase, knowing you can repay the loan once you secure long-term financing.


Prevent Financial Losses 

Bridging finance can serve as a means of preventing financial losses in a range of circumstances. For instance, unexpected utility or tax bills can negatively impact your credit score, increasing borrowing costs and possible future restrictions. In such cases, bridging loans can be utilized to settle these bills.

Additionally, when mortgage payments become difficult to manage, borrowers risk having their property repossessed by the mortgage lender. In such instances, a bridging loan can enable borrowers to repay mortgage instalments and avoid the property's repossession. It also gives them additional time to sell the property at a better rate than the mortgage lender might have offered.

Get Profit From your Property 

While many articles focus on the potential risks associated with bridging loans, there are also significant benefits to using this financing option.

By selecting a reputable and experienced lender, borrowers can secure the right transaction at the right time, making bridging loans highly profitable. For instance, if you want to sell a property that requires significant renovation, you may have to accept below-market offers. However, a bridging loan can give you the funds needed to renovate the property before the sale, thereby increasing its value.

Bridging loans also offer the opportunity to fund projects that may be otherwise unavailable. For instance, you can finance development projects using bridging loans and earn a profit by selling the newly developed property.

Is Bridging Loan A Good Idea? 

Based on the benefits mentioned earlier, it is clear that bridging loans can be valuable in various situations. The loans can be obtained quickly, and the lenders are generally not concerned about the purpose of the funds as long as the loan is repaid. Nonetheless, the eligibility and interest rates criteria vary depending on the lender. Therefore, finding a lender that provides competitive rates and meets your requirements is crucial.

Conclusion 

In conclusion, bridging loans offer a range of advantages over traditional bank loans and mortgages, making them an attractive option for borrowers in the UK. From their rapid processing time and flexibility to their ability to prevent financial losses and provide profit opportunities, bridging loans are versatile and can be used for various purposes. However, it is important to carefully consider the eligibility criteria and interest rates offered by different lenders to find the most competitive deal. With the right lender and appropriate use, bridging loans can provide a valuable financing solution for individuals and businesses.





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