Before talking to an expert about your requirements for bridging finance, there are a few other factors to consider. Essentially, bridging loans are designed to be a route to raise money quickly and, as such, should be thought over carefully.
What to think about before applying for bridging finance
Consider these 3 points before applying for your bridging loan:
1. Understand what is available & any related fees
When looking to take out a bridging loan, especially for the first time, it is important that you understand how the loan works and what the likely costs are. You can do this by using our free bridging loan comparison tool to compare rates and fees based on your circumstances.
If your situation is complex, talk to one of our bridging loan experts before applying. Our experience and knowledge of the market will help you to find the best deal quickly and understand how the loan will work and what is expected of you.
2. Consider how you will repay your bridging loan before taking it out
Bridging loans are generally repaid through 1 of 3 methods:
- Sale of the property.
- Refinance to longer-term debt.
- Money that is due to you but has not yet been received.
Due to the short term of borrowing and the fact bridging loan rates can be high in comparison to other, longer-term types of lending, it is important you can prove your ability to pay to loan off. Whether you are looking to refinance onto a cheaper form of debt, sell the property or anticipate money coming to you, it is important you are as sure as possible of the timescales.
When selecting the term of your bridging loan, it is easy to go for the shortest possible time frame in an attempt to reduce the amount of interest paid or maximise the net loan. If the loan term ends and you are unable to pay it back as agreed, you will be in default of the loan and may well be penalised financially.
It is advised that, when banking on the sale of a property, you are cautious. Delays are common and, in this situation, you could miss the loan’s end date through no fault of your own.
The same can be said about refinancing, or money that is due to be paid to you is the planned repayment method. Again, these can be delayed and cause issues.
If you choose to take the refinance route, ensure the application you intend on submitting is realistic and likely to succeed. If you’re confident that this is the case, lenders will be able to give you an initial indication of their intention to lend. By taking this step, you will reduce the risk of failing to repay your bridging finance.
3. Choosing the right solicitor
Picking the right solicitor is crucial to ensuring the loan completes on time and without issue. A solicitor who is experienced in dealing with bridging loans will ensure the legal process runs smoothly and quickly.
Your solicitor will act as the sole liaison between the lender and yourself when it comes to your understanding of the legal terms of the loan. With this in mind, it is advisable that your solicitor is well versed in dealing with bridging loans.