What are the costs involved in taking out a bridging loan?

Thursday, 20 October 2011 09:15

Bridging loans incur a number of costs

Bridging loans incur a number of costs

Taking out a bridging loan can be a great way for you to raise the cash needed to meet a range of financial goals; however, it is a good idea to first be aware of the costs that are attached to such products.

As bridging loans see you borrow against the value of a property, this can be a significant financial commitment. And even though they can put you in a position to borrow several thousand pounds fairly quickly – you can usually get your hands on the money within a few days of applying – it is worth taking some time to ensure you have a proper understanding of the charges and fees you will be liable to pay once your application has been processed and the cash is in your account.

Perhaps the one factor that will have the most influence over how much the credit arrangement will cost you is bridging loan interest rates. Charged each month as a percentage of the initial sum that you have borrowed, the specific amount of interest you will pay will not only depend on the size of the loan that you want to take out, but also your credit rating and the particular company that you borrow from.

However, while the headline interest rate may represent the majority of the costs that are involved with taking out a bridging loan, you should remember that this is not the only charge that you will have to pay. As such, it is worth thinking about more than this particular figure when establishing the impact it will have on your day-to-day finances.

You will find you have pay to legal and administration fees, and certain loan providers will integrate these costs into your monthly repayments. In addition, you will discover that you have to pay a valuation fee in order to meet the cost of assessing the value of the property you have secured a loan on.

With the raft of charges and fees that you are liable to pay upon taking out a bridging loan, it is perhaps unsurprising that many people are inclined to repay their debts as quickly as possible. However, it is worth your while to first exercise caution about doing this as some loan companies impose an early repayment fee. This could be charged as a nominal percentage of the overall amount you have taken out or set at the equivalent of one month's interest.

Other bridging loan providers, however, take a much more flexible approach to how their customers repay their debts and you will discover some allow you to set your own borrowing term.

You should also bear in mind that while some companies will charge a fee simply for making an application for a bridging loan, others will allow you to do so for free.

To get an idea about what costs you may be liable to pay, it is worth your while getting in touch with a bridging loan company for advice.

By calling bridging loan telephone numbers, you will be able to speak to an expert adviser to not only find out about which particular fees they will impose but also the way in which they will be charged. In doing so, you can get a good idea of the scale of the financial commitment you are taking on.

 

Comments

blog comments powered by Disqus

Finance articles

  • Is a bridging loan right for budding entrepreneurs?

    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.

  • Important questions to ask bridging loan companies

    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.

  • Why bridging loans are only suitable for short-term funding

    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.

  • Banks vs. specialist lenders – which bridging loans are best?

    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.

  • Can bridging loans work for those who only need small amounts?

    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.

View More Articles

Related stories

Auto-enrolment could be scuppered by high charges on old schemes

Steve Webb says he will be watching pension charges "like a hawk"

A new report by the Pensions Institute warns that the success of auto-enrolment could be put at risk if employers use old defined-contribution schemes that have high charges.

ABI calls for pension charges to be made transparent

The ABI is calling for transparent pension charges

The Association of British insurers has detailed its proposals to ensure that all pension charges are clear and transparent ahead of auto-enrolment.

Pension funds could be halved by hidden costs, warns RSA

RSA report warns over hidden pension fees

Hidden charges are slashing Brits’ pension pots, while providers are misleading savers about the effect of fees, a leading think-tank has warned.

NatWest software error repeated twice to compound problems

NatWest's technical problems continue into a 7th day

Reports suggest that the initial error that caused the IT glitch last Tuesday evening was repeated on both Wednesday and Thursday to compound the problems.

Lloyds TSB to hike overdraft rates

Lloyds TSB to put up overdraft fees

Lloyds TSB is to increase overdraft interest rates and the monthly overdraft usage fee on its free and paid-for current accounts, the bank has announced.

Sainsbury’s Bank offers best buy personal loan at 5.9%

Sainsbury's tops best buy personal loan table

Sainsbury’s Bank has leapt to the top of the best buy tables with a personal loan at 5.9 per cent – the lowest rate offered by lenders for almost five years.

Sainsbury’s promises to beat competitors’ personal loan rates

Sainsbury's unveils loan price promise guarantee

Sainsbury’s has pledged to beat rivals’ lending rates for customers who successfully apply for a standard personal loan with the supermarket bank.

Derbyshire BS offers personal loan at 6%

New loan rate launched at the Derbyshire

Derbyshire Building Society is offering a personal loan with a market leading rate of six per cent APR representative for amounts between £7,500 and £14,999.

Newsletter sign up

Interests

In addition to the weekly newsletter, which areas of finance would you like to hear from us about:

Tick this box if you would like us to send you promotions from carefully selected third parties.

By signing-up you agree to the terms of use and privacy policy.

sign-up button

Get the latest information on: