|A bridging loan is a type of short term finance that provides a quick solution when other means of finance cannot be arranged or are unsuitable.
Why a bridging loan?
The need arises when a large sum of money is required within a tight timeframe and the relevant amount of cash is not available. This is best illustrated in purchasing auction properties where deposits must be paid within 28 days of the bid.
Bridging loans typically last for any period up to 24 months, sometimes longer depending on the terms agreed. Charges for a bridging loan vary quite significantly depending on risk factors but on average you could be paying around 1.5% interest per month.
What do lenders require to give a bridging loan?
Firstly, you will need to show that you have the means to pay back the monies that have been loaned. This could be in the form of an asset that you intend to sell in the near future, be it a development project or existing property.
Lenders will only provide unregulated loans. This means they will not give bridging finance to property owners who want to use their own residential property that they live in as security for a loan.
The minimum amount loaned is £50,000. Some lenders can provider a smaller amount, however, this is rare given that bridging loans are a type of commercial finance.
How long will it take to arrange a bridging loan?
Bridging loan finance can be arranged in as little as 72 hours depending on whether you can provide the relevant information. Most applications that we arrange take around 5-7 days so we advise you to make initial enquiries with us with at least a week’s notice for your intended loan.