The decision to take out a bridging loan is one you must make yourself.
The first step is to ascertain whether a bridging loan represents your best option or whether you should explore other avenues.
A bridging loan can work for you if you fulfil some or all of these criteria:
• Poor credit rating
• Sporadic income
• You need a lot of money quickly
• Your funding needs are short term
• You wish to purchase a dilapidated property
While the decision is ultimately yours, that does not mean you should not seek advice either from bridging loan companies themselves or independent financial advisers as to what this type of finance involves and the various advantages and disadvantages associated with it.
Bridging loan companies do so much more than provide finance. They are staffed by professionals who are able to help you in several areas.
Filling in the application
When you apply for a bridging loan, you will have to provide various pieces of information, ranging from your income, your debts and any assets you have.
While filling in the application form is pretty straightforward, some people run into difficulties in areas such as how much information to provide and whether they are eligible.
A bridging loan provider will be more than happy to discuss the application process with you and guide you through every section of the form, so you can fill it in as accurately as possible.
This is essential if the whole process is to go smoothly and you are to receive the funds quickly.
The valuation process
When you apply for bridging loans, you will need to use your home as collateral. Some companies are prepared to accept other assets as security, however, you will need to discuss this with them.
If you are using your property as security, it will need to be valued.
A bridging loan company will be able to talk you through the process of how your property will be valued and who it will be valued by.
Determining the final repayment figure
One issue you must be absolutely clear about before you submit your application is bridging loan interest rates.
Interest rates on bridging loans can be significantly higher than those associated with traditional bank loans, so it is important to understand this point and how it will affect you.
How much you will pay depends on whether you opt for an open or closed bridging loan. An open loan has no pre-determined repayment date, while a closed loan does.
With a closed loan, you will know how much you will accumulate in interest by the time the repayment is due, so you have a definitive figure – provided you repay it on time.
An open bridge is more difficult as you could repay it in six months or 18 months. The longer you take to repay, the more interest you will accrue and the more you will have to pay back.
A bridging loan company will be able to discuss this with you and advise you on whether an open or closed bridging loan is your best option.
Bridging loan companies on the whole are responsible organisations and are only too willing to help prospective customers with anything they are unsure of.
As taking out bridging finance is such a big decision, there services are something you should take advantage of.
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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