While bridging loans can be an excellent solution to your short-term financial needs, they need careful consideration. To ensure you get the right option for your loan requirements, you need to do sufficient preparation and research.
Bridging Loans: Things to Consider
Our short guide explores the key areas to consider when applying for bridging loans.
Know What’s Involved
It’s essential that you fully understand everything involved in this type of short-term finance before applying for a bridging loan. Knowing exactly how this type of loan works, what’s required of you, and the potential fees will help you decide whether you should apply.
If you are unsure or want to be clear of the facts, always speak to a bridging loan specialist, like Finbri, who can also help you find the best products and quotes. Getting the right advice is even more critical if you are looking for an urgent bridging loan.
Have a Repayment Strategy
You’ll need to know how you intend to pay back a bridging loan in advance and be confident that you have the finances to do so. Having a repayment ‘exit’ strategy will also mean you don’t extend yourself and have the confidence to apply.
You can pay off a bridging loan in one of three ways: funds raised through the sale of a property, refinance on a property or via money that is due to you but you have not yet received.
When planning your repayment strategy, you’ll also need to factor in any set-up fees as well as interest rates. As bridging loans are short term (typically no more than 12 months), the interest rates can be significantly higher than longer-term financing, such as standard mortgages. Your lender will also need to see evidence that you can pay off the loan, including all the associated interest and charges.
Go for The Best Payment Term for You
To minimise the total interest you pay, it can be tempting to opt for the shortest repayment period you can get. But if you don’t have the necessary finances at the right time to keep to the repayment schedule, it could lead to a default on the loan. And this means you could face additional financial charges.
You also need to factor in any potential delays to obtaining the funds to repay the bridging loan in time. For example, the property you are selling may not sell as quickly as you had anticipated, or you may not get the refinancing you had planned to pay off your bridging loan by its end term.
If you have decided to repay a bridging loan by refinancing an existing property, then make sure your re-financing application is realistic and has the best chance to be approved. And always get an indication of a refinance offer before applying for a bridge loan.
Only Use A Reputable Loan Provider
Finally, when seeking advice on applying for a bridging loan, only ever use a reputable loan provider. Experienced providers, such as Finbri, have the expert knowledge and guidance you need to apply for a bridge loan. And their support will ensure the whole process runs as quickly and smoothly as possible.