It’s fair to say that bridging loans landed in the United Kingdom with an initially shaky reputation. For the most part, short-term loans in general have always been viewed with a certain amount of scepticism. Particularly in instances where non-payment leads to heavy penalties in a relatively short period of time.
Today, UK borrowers and financial watchdogs alike are beginning to view bridging loans in an entirely different way. Whichever way you look at it, bridging finance has the potential to provide an invaluable lifeline in a time-critical situation. Nevertheless, this doesn’t mean that bridging loans are always the most appropriate or economical option.
They are one of hundreds of unique financial products available on the UK market, with their fair share of advantages and disadvantages.
Considering all available options
Accessing the most appropriate financial products for any given requirement means considering as many options as possible. The easiest way of doing so is to contact an independent broker, who can compare the market in its entirety on behalf of the borrower.
Should it be decided that a bridging loan is the way to go, it’s important to consider all the advantages and disadvantages ahead of time. A bridging loan could prove invaluable when time is a factor, but it should never be applied for without careful consideration.
The advantages of bridging loans
As far as advocates are concerned, the most appealing advantages of bridging loans are as follows:
- Bridging loan applications can be completed, processed, and finalised in a matter of hours. Across the board, bridging finance is exponentially quicker and easier to access than a comparable high-street loan.
- Borrowers have the option of repaying the loan in its entirety in one lump sum on a predetermined date. For some, this is preferable to the usual monthly instalment approach.
- Lenders often demonstrate a fair amount of flexibility with the collateral they are willing to accept to cover the cost of the loan. This makes bridging finance ideal for property refurbishments and redevelopment projects.
- Poor credit applicants are not necessarily counted out of the running, as eligibility is usually determined exclusively on the basis of collateral. Even if you have an imperfect credit history, you can still qualify for a bridging loan in no time.
- Bridging finance can be great for taking advantage of time-limited investment opportunities, such as purchasing properties at auction.
The disadvantages of bridging loans
As for the downsides, the following should be taken into account before applying for a bridging loan:
- There are typically no allowances for repaying bridging loans over longer periods. Loan terms usually last 6 to 24 months, maximum.
- Penalties and additional interest charges can be particularly steep in the case of non-repayment of the loan. It’s therefore important to carefully consider your financial status before applying.
- As bridging loans are secured loans, your property may be at risk of repossession if you fail to meet your repayment obligations as specified in the contract.
In terms of reputation, there will always be those who favour one type of credit over another. Nevertheless, evidence would seem to suggest that more businesses and everyday borrowers than ever before are considering or applying for bridging loans.
At the right time and with the help of a responsible lender, bridging loans can be surprisingly affordable. They can also be the only realistic option on the table in time-critical situations. If you simply cannot sit around for days or weeks on end for a bank to make up its mind, bridging finance could be the answer.