“What can you use a bridging loan for” is a query that many people search for when they need to secure short-term funding. Bridging loans take their name from the way they help ‘bridge the gap’ when individuals and businesses are waiting to receive money but can’t get immediate access to it. How to compare bridging loans safely in the UK
A major reason for the popularity of bridge or property loans is that they can help people avoid missing out on properties that they want to buy. However, there are many other things you can use bridge loans for too.
Let’s take a look at some of the main bridging loan purposes right now. You may also be interested in bridging loan alternatives
Bridging loan purposes
Property purchases
As we said before, bridging loans UK are often used to buy new properties when waiting for existing ones to sell. This can stop the transaction from being delayed or falling through, preventing chains from being broken.
They can be very convenient when you’re buying a property at an auction, where you could face tight deadlines. You may also be able to get a bridging loan to buy a property that’s not suitable for a traditional mortgage, such as one that needs lots of renovation.
These loans can also be very useful if you want to renovate or develop a property so you can sell it on for a profit.
Debt consolidation
Bridging loans are also popular with people who want to consolidate a number of debts into one manageable payment.
Land Purchase
Land purchases without planning or income often require specialist funding, which is where land bridging loans are used to secure sites ahead of development or sale.
Overcoming cash flow gaps
These loans can also be helpful in situations where people are waiting for money to come in from clients or long-term loans. If you’ve got a temporary cash flow shortage, a bridge loan could be a great solution.
Legal fees and tax
It’s not uncommon for people to use bridge loans when they have legal fees to cover, or tax bills to clear.
Common questions about bridging loans
What are the main criteria for a bridge loan?
If you want to take out a bridge loan, you’re more likely to be accepted if you have a clear strategy, have something to secure the loan against such as a property and have a good credit rating.
Can I secure multiple properties against a bridge loan?
Yes. You may be able to borrow more if you have multiple properties or other valuable assets to secure against your loan. You may be able to secure your loan against the property you’re purchasing as well as the one you’re selling.
How much can I take out with a bridge loan?
The amount that you can borrow will depend on a range of factors. These include the value of the property or assets that you’re securing it against. The more you want to borrow, the stricter the criteria are likely to be.
How long do bridge loans last for?
Most bridge loans need to be paid back within 12 months, though some agreements last for up to 36 months. If you want to pay your loan off over several years, you may have fewer lenders to choose from.
What else are lenders likely to consider?
Lenders are likely to consider factors like the type and location of your property when deciding whether to approve you and how much they’re prepared to lend. You may get better terms if your property is in good condition and in a desirable location. They will also consider how much equity you have in your existing property.
How important is my credit score?
Your credit score is only one of several factors a bridge loan lender will look at when they’re making a decision. The score won’t play as big a role as it does when you’re applying for a traditional role or a mortgage. The lender will pay much more attention to the strength of your exit strategy. Many people have been able to access bridge loans with bad credit.
Will I need proof of income?
You may need to provide proof of income when applying for a bridge loan. You can strengthen your application by providing the lender with things like tax returns, bank statements, payslips and proof of rental income. If you’re self-employed, you may need to provide additional evidence to support your application.
Is it easy to apply for a bridge loan?
The bridge loan application process can seem daunting, especially if you’ve never taken out this credit before. A bridge loan broker can provide all the guidance that you need to simplify the process and provide the clarity that you need. There are thousands of bridge loan products on the market, and what’s suitable for one borrower isn’t always right for another.
Your broker can research the market on your behalf and introduce you to products that meet your specific requirements. Most lenders only work through brokers so you can’t normally bypass them and go straight to the lender.
Another great benefit of using a broker is that they can help with the legal side of things. They can find a quality solicitor or work with the lender’s solicitor to simplify the underwriting.
Who uses bridge loans?
Bridge loans are available to everybody over 18 who meets the criteria. They are popular amongst individuals, partnerships, limited companies and businesses.
How long does it take to get a bridge loan?
It can take just a few days to get access to bridge or bridging loan. The less complex your application is, the quicker you’re likely to get your loan. If you need a fast bridging loan UK you will need to make sure you supply everything quickly so that the broker and lender can act quickly.
How much do bridging loans normally cost?
When you take out a bridge loan, you’ll normally pay a fee of around 1-2% of what you’re borrowing as well as the interest. Some lenders charge more interest than others, and you may have to cover additional fees. You’ll normally pay the interest at the end of the agreement rather than on a monthly basis, whatever the bridging loan purposes are.
How we can help
Now you know more about “what can you use a bridging loan for”, you might be wondering who can assist you when you need access to one. At Bridge Loan Direct, we’re able to assist with all kinds of bridging loans. We have access to more than 300 lenders, which means we can get you some of the most competitive rates on the market. We have more than 35 years of industry experience between us and work tirelessly to help our clients get the funding that they need.
