Bridging Loans Explained

In what circumstances would I need a bridging loan?

Home Owner

Landlord/Property Developer

Business Owner

Key points about Bridging Loans

  • You can borrow from £25,000 to an unlimited amount
  • Bridging loans are for short-term borrowing from 3 months up to 24
  • Fees are between just 0-2% of the advance, depending on the lender and individual circumstances
  • Bridging loans rates start at just 0.59% per month
  • Bridging loans can be used when a bank loan is not an option - CCJ’s, defaults and IVA’s are always considered
  • Bridging lenders tend to focus on a clear and concrete exit strategy rather than income due to the structure of a typical bridging loan

So, how do bridging loans work?

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Bridging loans are designed to ‘bridge a gap’ of time in an individual’s financial circumstances. Bridging loans are short-term, taken out against a domestic or commercial property typically for a length between 3 and 24 months.

Bridging loans can be one of two types - a Closed Bridge or an Open Bridge. In a Closed Bridge, the borrower will have a fixed date when the loan will be repaid. For example, the borrower has agreed the sale of their property and the date has been set. The sale of the property will repay the bridging loan.

In an Open Bridge, the borrower proposes a repayment plan but there is no definitive date upon which the borrower knows they can repay the loan. There will be a cut-off point by which the loan must be repaid.

The typical bridging loan process

The Application
Loan.co.uk receives an application for a bridging or short term loan

Case Assessment
We search our extensive panel of lenders to find the most suitable product based on structure, rate and fees for the customers circumstances and a summary is provided by Loan.co.uk.

Loan.co.uk provides Figures
At this point we will obtain comparable figures on the asset(s) to ensure they are reasonable and provide the in principle figures for their loan

Valuation Report
The customer pays the fee for the valuation that is required and Loan.co.uk instructs a valuer on the lenders panel to provide a full valuation report on the security property(s).

Offer Letter
At this point the lender issues the offer letter to the customer. This states the terms of the proposed finance arrangement.

Sign & Send
The customer agrees the terms & conditions of the loan, signs & sends all the necessary documentation back to Loan.co.uk.

Chase to Completion
Loan.co.uk will chase and liaise with the lender and most importantly the solicitor(s) and facilitate the swift progress of the case to payout.

Payout
Following the final checks, funds are released and the money is made available to the solicitors to complete the transaction.

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