Consider the key aspects of bridging loans

Bridging loans can prove an effective way to borrow, especially at times when you need to get money quickly. However, before you apply for one, it is worth first bearing in mind the product's characteristics.

A bridging loan is a significant financial commitment – not least of all because it is secured against a property – so by having a thorough understanding of its features you can be confident that you are making an informed decision when taking one out.

It is perhaps worth considering first what kinds of development you can borrow against in order to access bridging loans. While it is possible to obtain such finance when borrowing against residential, commercial and mixed-use buildings, the latter two can only be used by those borrowing for business purposes. You will also need to make it clear on your application form the type of property you intend to use as security for your loan.

Whatever kind of building it is, you must own it in order to get a bridging loan (they cannot be taken out by those who rent their home) and it is worth remembering that if you do not keep up with your repayments, you may be at risk of losing your property.

By borrowing against the value of a building, you can get your hands on significant sums of money. The actual amount you'll be able to take out will depend on how much your home or commercial property is worth; in some cases you may be able to borrow as much as £250,000.

Typically, bridging loans are sought by those looking for a financial boost to help them advance up the housing ladder – usually when there has been a delay in the transaction chain – but they can be used for a multitude of other purposes.

In the past, people have turned to them as a way of paying for home improvements and consolidating debts, while businesses have used them to buy out rival companies and to fund the acquisition of new commercial premises, so whatever you are hoping to achieve you are bound to find that they are an effective choice for meeting your particular financial needs.

Regardless of your reasons for wishing to take out a bridging loan, you'll find they can be obtained fairly quickly. Upon receiving your application, a lender should inform you whether you have been successful in the space of 24 hours and, provided that you have been given the go-ahead, the money could be in your account within a few days.

As in the same manner of other kinds of borrowing, the specific bridging loan interest rates you will be subject to will be based on a number of factors. They not only include the amount of money that you wish to borrow, but also the value of the property the loan will be secured against and your credit rating (it is worth remembering that these products are not available if you are currently bankrupt), and some loan providers can offer rates starting as low as 1.25 per cent.

Whatever your reason for wishing to take out this kind of loan, it is a good idea to speak to an expert first. By doing so you'll be able to find out all about bridging loans and figure out what the right option for your needs will be.