Factors to think about before applying for a bridging loan

Wednesday, 28 September 2011 01:14

Get bridging loan advice before you apply

Get bridging loan advice before you apply

A bridging loan can offer a useful way of raising the money needed to buy property – as well as achieve a range of other goals – however, that you lend some consideration to the product before applying one.

These loans represent a major financial commitment, not least of all because they are secured against your property, so you ought to take plenty of time to think about whether they will be the right choice for you. Indeed, there are many factors to bear in mind, not least of all what you are hoping to achieve upon obtaining one.

While bridging loans are a particularly effective means of quickly gathering the resources required when buying a home, this is by no means their only purpose and they can also be used to fund property improvement projects and pay off multiple debts. Whatever you're hoping to achieve by taking out a loan will, of course, influence the amount of money you need to borrow, so ensure that you think carefully about how much you will require.

Prior to filling out a bridging loan application form, it is also vital to consider your credit history.

Although being currently bankrupt is the only financial black spot that will automatically prevent you from getting a bridging loan, you should bear in mind that you will have to put on your application whether you have problems repaying debts in the past or have upcoming county court judgements. While these in themselves shouldn't be a barrier to you getting a loan, they can have an impact on the rate of interest you pay.

You will also have to provide details of your financial liabilities, including how much money is outstanding on your current mortgage and – if applicable – the amount you owe on likes of personal loans, credit cards and overdrafts, so thinking about how you will meet these commitments, in addition to paying back your bridging loan, can certainly be a good idea. It is also worth remembering that these credit deals are only available to those who already own a property, so if you rent you will have to consider other options, and if you do not keep up with repayments you may be at risk of losing your home.

Repaying the amount you have borrowed and the interest charged on it will account for the majority of your payments; however, this isn't the only financial demand that you will have to contend with when seeking out a bridging loan and other charges you may be liable to face include valuation costs and legal expenses. Some providers require that these are paid separately, although others will integrate them into your monthly repayments.

Of course, it's vital that you give thought towards how exactly you intend to repay your loan before you take it out. Their status as a short-term lending deal means that they typically need to be paid back somewhere between one and 12 months. You'll find that some lenders impose a rigid payment schedule, while others are more flexible over how you settle your debts. Consider your options carefully, before figuring out which is the best choice for you.

With so many things that need to be taken into account, it's a good idea to search for bridging loan advice. By speaking to a professional company, you can ask questions about such products and the financial commitment they represent so that you have a total understanding of the obligations that they place on you.



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