Bridging loans can help amidst soaring interest rates

Bridging loans are loans that have no interest which are usually offered to those who require money immediately. It’s basically a bridge between credit being available and incoming debt.

The short-term lifeline can help anyone looking to purchase an item for auction make construction works and much more – especially when time is a problem.

Mike Collins Mortgage Expert, who has 17 years’ expertise in financial planning, stated: ” With two in five home buyers losing their home purchases due to mortgage delays, the importance of being able to make a move quickly is evident from the perspective of the borrower – and they are able to do it with a bridging loan.

“Interest rates on the bridging loan are higher than other finance products and I’ve been asked many times recently whether now people need to be concerned that rates of interest have increased.

“The most straightforward answer is that a bridging credit is typically repaid in some months, making the interest more controlled and consequently, the loan more affordable. In this article, I’ll provide more information about bridging loans and why they could be beneficial in the current climate.”

Rates of interest for bridge loans

These are fixed rates – stabilizing your finances if you are able to be able to keep your payments on track for the term you have agreed. Variable loan rates tend to fluctuate in accordance with the Bank of England base rate currently in the market is 2.25 percent (Sept 2022).

The more interest you pay, the higher your repayments will be.

Rates can vary based on the purpose of the loan. Bridging loans with rates on business and land loans are greater as compared to a typical residential purchase.

The demand for buyers is extremely large. This can cause delays in the purchasing and conveyancing processes, which means it is essential to secure the bridging loan.

When you are looking at interest rates, it’s important to understand that they’re determined on a month-to-month basis. This is due to the fact that the duration of the rates is typically between 9-12 months.

Quick access to cash

If time is important that is the case for the projects mentioned above the bridging loan is easier to arrange than secured or mortgages.

Bridging loans can be released in just three days.

It’s a lot easier to arrange due to the fact that the lending decision is based on the exit strategy you have in place. This is the way you plan to pay back the loan after the term expires.

You can get one if your credit is bad

As usual the credit score will determine whether you are accepted for a bridging loan , but it could also affect the interest rate and fees you might pay.

It’s not impossible to secure one even if bad credit as the lenders put more emphasis on the value of the property they are lending the loan than your credit score when they consider rates.

Since the loan is secured against the value of an asset and there is no long screening processes.

Help with broken chains

Recent research has revealed that one in five applicants needed a bridge loan due to a malfunctioning chain. This caused delays in their purchase and required them to obtain a loan to pay for the gap.

With the completion time currently being around four months in the average the bridging loan can be an option to allow the sale.

But, the current spike in interest rates could mean a drop in buyer demand and, as a consequence, a decline in bridging loans. But in the meantime, loans such as these could become vital for many buyers and property developers.

Whichever bridging loans you select be sure to check that they are members of the Financial Conduct Authority (FCA). This means that any complaint that arise, particularly those involving significant amounts of money will be dealt with in accordance in accordance with FCA guidelines.

The reason why a business should utilise a bridging loan

A bridging loan is a short-term loan option that could provide companies with the funds they need to pay for immediate expenses or capitalize on a momentous opportunity. These loans are commonly utilized to make up the difference between the acquisition of a brand new property or asset and the receipt of a longer-term loan. For instance, a business may use a bridging loans to swiftly purchase a piece of equipment required to fulfil a new contract or to purchase an asset before the current one sells. Through the quick availability of funds, bridging loans are able to assist businesses in growing and succeeding.

How do I get a bridging loan in the UK

To get an bridging loan within the UK it is necessary to find a lender who provides this kind of loan. A lot of banks and financial institutions offer bridging lending. There are lenders that specialise in lending to bridging companies. The lender will evaluate your creditworthiness as well as your financial situation before granting you an loan.

Why a bridging loan can be a lifeline in the current climate – Mike Collins Mortgage Broker