Are you looking for bridge or bridging loan alternatives? Bridge loans can be very convenient when you need access to short-term finance, but there are times when you might need to raise cash another way. One example might be when you need to borrow for longer than a year or two. See more about how to compare bridging loans safely in the UK
Let’s look at some of the most popular bridge loan alternatives that might be available to you
Equity release
Another option which might be available to you if releasing the equity in your property. With equity release, you can access some of your home’s value and won’t have to make monthly repayments. You will pay the loan – and the interest – back when you sell your property instead.
Personal loans
Some personal loans aren’t secured against anything, which removes the risk of losing an asset if you can’t stick to the repayments. These loans are available from private lenders and banks. If you want to pay less interest, it’s best to take out a shorter-term personal loan. You can use personal loans for a variety of things including renovating a property or consolidating your debts.
Second-charge mortgages
With this solution, you can use the equity that’s in your property as collateral to take out a second mortgage. This could be ideal for you if you need much longer to repay. A big benefit of a second-charge mortgage is that your existing mortgage will be protected and you don’t need to remortgage.
Remortgaging
Remortgaging is another option which sees you switching your existing mortgage to a new lender. It can also come in the form of renegotiating with your current lender to get more favourable terms. Remortgaging can help you get access to a substantial amount of money. You may be able to access more than you’ll get with a bridge loan, though the application process can take a few months.
Loans from friends or family
A way to borrow without having anything added to your credit file is to borrow from a friend or family member. You won’t have to pay interest unless you agree to do this as part of the deal, and you won’t be faced with the additional fees you’ll pay with a traditional loan. Just remember that your relationship could become strained if you’re unable to stick to this informal agreement.
If you have savings available, you could also use these to fund whatever you require cash for.
A commercial mortgage
A commercial mortgage is a long-term loan. It allows you to either buy or refinance a commercial property. You’ll have longer to pay than you would with a bridge loan and can expect to pay less in interest. The property that you’re financing will be used as security, so existing ones won’t be at risk.
Development finance
If you want to make changes to a property to increase its value, you could look into development finance options. A key difference between development finance and a bridge loan is that the former isn’t secured against an existing property. The finance will instead be secured against the expected value of the property you’re developing. This is called the GDV or Gross Development Value.
A refurbishment loan
Refurbishment loans are taken out to fund the renovation of properties which require changes to be made before they can be let out to tenants or sold. Once you have made the improvements, you can then get a traditional mortgage on the property.
Alternatives to bridge loans for businesses
The alternatives to bridging loans listed below are designed with businesses in mind.
Merchant cash advances
Merchant cash advances are repaid on a daily basis, with the lender taking a portion of your daily card sales until you have repaid in full. As you may expect, you will have to pay additional fees. Interest rates tend to be somewhat high. They are not secured against anything other than your sales and can give you access to vital cash within just a few days.
Asset finance
This is a kind of finance you can use to buy equipment for your business. This can include new and used items. Some companies use it to fund essential items sold at auctions. The loan will be secured against the asset that you’re buying, so you don’t need to use anything you already own as collateral.
Invoice finance
Another option that you might have available when you need funds for a business is invoice finance. This enables you to gain access to cash tied up in invoices which are yet to be paid. This can have a great impact on your cash flow and is particularly advantageous for those who have longer invoice terms. Your business will need to have a minimum annual turnover if you want to take advantage of invoice finance.
Small business loans
These loans are offered by banks and other traditional lenders. They’re aimed at growing businesses and are known for their flexibility. If you require a bespoke solution for raising finance, a small business loan could be ideal for you. They can be a valuable alternative to bridge loans if you want to keep interest to a minimum.
How to make bridge loan alternatives work for you
Before you take out any kind of finance, it’s important to do your research to ensure you’re getting the right solution for your needs. Watch out for high interest rates and additional fees, and make sure you’re only using reputable, trusted lenders. Read the terms and conditions very carefully to ensure you fully understand what you are agreeing to. What can you use a bridging loan for
Who can help if I still want to take out a bridge loan?
If you’ve looked closely at bridging loan alternatives but still feel a bridge loan is the right solution for you, we can help. At Bridge Loan Direct, we have a great deal of experience in helping individuals and businesses to secure bridging loans UK. We have more than 35 years of combined experience between us and have relationships with more than 300 lenders. This enables us to help you get the best possible deal for your specific situation and circumstances.
We are passionate about helping our clients get access to the funds that they need whilst keeping the cost of borrowing to a minimum. When it comes to putting you on the fast-track to financial flexibility, we lead the way.
