A Bridging Loan Can Save the Day
By Sadiya Anjum
The phrase ‘bridging loans’ aptly describes these loans. They are basically short term loans that can be obtained when there is an urgent need to raise money. Bridging loans are secured loans where your property serves as collateral.
Consider a simple case of selling your old home to buy a new one. You may have found your new home but you are unable to raise the finances due to problems in your mortgage or the difficulty in selling your old home. Instead of waiting for finances to show up as you had initially planned, you take on a bridging loan to solve the problem and purchase your new home.
Bridging loans are taken for a short period of time ranging from a few months to a year. In this time, the borrower is required to sell the property and clear the loan amount. In case the borrower defaults then he may stand the risk of losing his property which is serving as collateral. Since bridging loans are taken for a short period of time they incur higher interest rates when compared to conventional mortgages.
Despite its distinct disadvantage of high interest rate, these loans are extremely popular. To begin with, they provide the money required in a very short period of time. There is less documentation, no valuation, no solicitors involved etc. So it is a practical course of action to take when looking for finances in a short period of time.
Bridging loans can be used for many purposes. You can gain immediate financing when looking to purchase a residential home, auction property, commercial property, property abroad, a property in need of renovation which is intended for resale etc. Money obtained from a bridging loan can also be employed for any other purpose such as starting a new business venture. Gaining finances at short notice is now possible and can help you secure properties before another bidder buys it.
Even with poor credit, bridging loans can be easily obtained as a property serves as collateral. But before you consider obtaining this loan, you should seriously consider your financial situation and how realistically you can afford to repay this short-term loan. As with all loans, bridging loans too should be shopped for with various lenders before settling on any particular offer.
Bridging loan has its disadvantages in the form of a high interest rate and short term period. But as long as you are sure of repaying this loan and it seems practical in a given situation, a bridging loan can save the day.
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