3 Things To Think About Before Taking Out A Bridging LoanBy Angelica Malin
Bridging loans are not something that should be taken out on a whim. Choosing to use one requires a lot of thought and research in order to ensure that it’s the best option for you. This guide will take you through three things to think about before taking out a bridging loan.
1. Understand What’s Involved
When considering a bridging loan, especially for the first time, it’s critical to understand how the loan works and what the potential fees may be.
Talk to bridge loan professionals before applying if your situation is complicated. Their experience and expertise of the market will assist you in finding the best quote for your circumstances quickly, as well as how the loan works and what is required of you.
2. Think About Your Exit Strategy
A bridging loan is repaid one of three ways:
- Selling the property
- Money that is due to you but has not yet been received
As borrowing durations are usually short-term, and because bridging loan rates may be relatively high when compared to other longer-term forms of financing, it’s critical to show that you have the ability to pay off your loan. Whether you’re refinancing into a cheaper kind of debt, selling the property, or anticipating money to flow in, it’s critical that you have as much information as possible.
When deciding on a bridging loan term, it’s tempting to go for the shortest period feasible in order to minimise interest expenditure or maximise net loan. If your loan term expires but you are unable to repay it as scheduled, you will be in default and may face financial penalties.
When it comes to selling a property, it is highly recommended that you exercise caution. Delays are typical, and you might fall behind on the deadline due to no fault of your own.
The same may be said about refinancing, or the planned repayment strategy is to pay off your debt over a period of time. These too may be delayed and cause problems.
If you opt for a refinance, make sure the one you plan on submitting is realistic and likely to succeed. If you’re certain that it is, lenders will be able to offer you an indication of their plan to lend. You’ll reduce your chance of not repaying your bridging finance by taking this action.
3. Choosing A Reputable Provider
Choosing the appropriate provider is critical to ensuring that the loan is completed on time and without incident. A seasoned bridging loan provider like Finbri Bridging Loan will make sure the procedure runs smoothly and swiftly.
With these three factors in mind, you should have everything you need to start the bridging loan application process! Remember to ask as many questions as need be to your lender and don’t hesitate to question any costs that might occur.