If you get your bridging loan application right, you can usually have the funds in your account within ten to 14 days of applying or even sooner in some cases.
As bridging finance is usually required to maintain one's place in a property chain or to purchase a home before someone else does, speed is of the essence.
That means a smooth bridging loan application process is essential. Applying for a bridging loan is not a difficult process and the criteria you have to satisfy is often not as stringent as those attached to loans from traditional banks.
However, before applying for bridging loans, you need to be absolutely sure that they represent your best option.
This type of borrowing is expensive due to the high interest rates imposed by lenders. As a result, there may be more cost-effective options on the table.
A good way to learn more is to seek advice from bridging loan companies or a financial adviser. They will be able to discuss your options with you and fill in any gaps in your knowledge.
If after this you are certain that a bridging loan is the way forward, the following tips can help ensure your application goes smoothly.
1. Know what type of bridging loan you want
If you have sought the advice of a financial adviser, they will have explained the two types of bridging loan available.
An open bridging loan is one where no repayment date is determined during the application process. Such loans are popular with those who want to buy a new home but lack the funds due to the fact they have not sold their existing home.
A closed bridging loan on the other hand does have a fixed repayment date stipulated. Usually, a bridging loan company will provide such finance for a period of 12 months.
Which loan you need depends on your circumstances and what your intentions are and having a clear idea about this will save you a lot of time when it comes to applying.
2. Ensure your information is accurate
When you apply for a bridging loan, you will be asked to provide several details about your earnings, assets, financial obligations and other relevant information.
While speed is of the essence, it is important that you take a little extra time to ensure the details you have been asked to provide are accurate, otherwise your lender may come back to you and ask you to clarify certain parts, which will delay the whole process.
In a worst-case scenario, they may reject your application on the grounds that you do not satisfy their lending criteria, which is something you want to avoid at all costs.
3. Ensure your property valuation is accurate
In order to secure a bridging loan, you will need to secure the funds against an asset, which in most cases is your property.
You will therefore need to give an accurate valuation of your property.
It may reflect badly on your application if your surveyor produces a figure that is deemed too high and any disputes on this subject will delay your application.
The bridging loan application process is very straightforward provided you are honest and give as much information as possible.
Withholding information or trying to inflate the value of your property will only delay the process and it will be you who ultimately loses out.
Raising the money you need to start a business can be hard, however, there are alternatives to bank loans. Among them are bridging loans, peer-to-peer lending and borrowing money from friends and family, meaning you need to do plenty of research.
Before taking out a bridging loan, you must understand a number of key points. These include the rate of interest you will be charged, the length of time you have to repay the loan and whether there are any arrangement fees that apply.
You should only consider bridging finance if your funding needs are temporary. This is because the high rates of interest make bridging finance unsuitable as a long-term solution, so if you have long-term needs, you should look at other options.
Both banks and specialist bridging loan companies can provide the bridging finance you need, meaning you need to compare products from a range of providers. You need to look at factors such as interest rates and arrangement fees.
Some bridging loan companies will lend up to £5 million if you have sufficient equity in your home, however, what if your borrowing needs are more modest? If you need a sum of £10,000, bridging loans can still be an option.
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