Basics of Bridging Loan

Wednesday, December 17, 2014

While searching for your dream house, if you happen to find any such property, you are definitely not going to leave the golden opportunity just due to lack of a few thousand pounds. Even if you witness some delay in the sale of your old existing property, you are not going to miss that chance and try to find some way out of such financial crisis. One of the best available options that you must take into consideration at such a crucial point of time is a bridging loan. These loans are designed specially to fill the gap between the sales of existing property and the purchase of a new one. For bridging loans, the very same property meant for sale serves as collateral.

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Bridging loan is a short term loan, which facilitates its borrowers with instant financial aid, in the hour of need. Being a part of short term finance market, the rate of interest for bridging loan is comparatively high. It serves best when an individual has plans to buy some new property, and is waiting for the amount that will be realised from the sale of his existing property.

Well, it does not mean that bridging loans cannot be used for any other purpose. Bridging loans have huge applicability. You can use it to meet any urgent cash requirement like buying car etc. A good credit score serves as an advantage but people with bad credit score can also avail it. While issuing bridging loans a number of things that a lender takes in to consideration are worth of your property, flow of income, and financial grade.

The repayment tenure of bridging loan may vary from person to person, also depends upon the loan amount and terms and conditions, written in advance. But a borrower should preferably repay the loan amount as soon as possible. Otherwise, it will lead to accumulation of larger amount of interest. Therefore, it raises the cost of borrower's loan and makes it more expensive.

A bridging loan has several advantages. For instance, it is a quick way to achieve instant approval for loan. Even people with bad credit score can have a bridging loan. And being short term in nature, it can be repaid faster. But it has some discrepancies as well, like they are expensive. Till the time of repayment heavy interest rates are charged, and in case you fail to repay the loan amount your property will be taken over by the lender. Yet, if chosen carefully and repaid on time bridging loans can prove to be really beneficial.

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