If you’ve been wondering ‘what is the difference between regulated and unregulated bridging loans?’, you’re in the right place. Bridging loans UK have become very popular amongst people who need quick access to finance when they want to purchase properties and other assets. What’s right for one person isn’t always the best match for another. This is why it’s so important to think carefully about what the best solution is for you before you sign in the dotted line.
Bridging loans take their name from the way that they help people ‘bridge’ the gap between outgoing and incoming funds. They normally need to be paid back within 12 months. However, some people only need them for a much shorter time period before they can repay them in full.
In this guide, we’ll explain the difference between unregulated and regulated bridging loans, how to decide which option is right for you and how to get help if you’re ready to take out a regulated or unregulated bridging loan.
Regulated and unregulated bridging loans explained
A regulated bridging loan is a loan that’s secured against your home or a property that you want to purchase. Unregulated bridging loans aren’t secured against any property. Regulated bridging loans are often chosen by homeowners who don’t have easy access to cash. These loans are regulated by the Financial Conduct Authority (FCA). There are strict rules around the loans, which are there to protect the borrower.
Unregulated bridging loans are not regulated, as the name would suggest. They’re usually taken out by property developers and investors who don’t normally need the protection offered by the FCA.
Is it difficult to find regulated and unregulated bridging loans?
It can be tough to find the right products when you need access to a bridging loan. One of the reasons for this is that there are so many products available. This can make it difficult for people to make sense of the market and find the right loans for their circumstances. For this reason, many individuals use loan brokers to find the best solutions.
Which kind of loan am I likely to need?
A regulated loan will normally be best for you unless you’re a seasoned investor. Regulated loans are normally taken out by people who will be living in the property that they want to purchase. Unregulated bridging loans are usually used by people who want to purchase second properties, buy-to-let properties and commercial assets.
What are the drawbacks of regulated bridging loans?
Regulation can obviously be very appealing for those that want to take out bridging loans. However, there can be some drawbacks. These can include lengthy, drawn-out processes and high amounts of bureaucracy.
What are the drawbacks of unregulated bridging loans?
As unregulated bridging loans aren’t regulated by the FCA, they don’t offer protection or compliant recourse to borrowers. They don’t normally come with a cooling-off period and sometimes have hidden fees and penalties attached to them. This is why they are more suitable for highly experienced investors.
What kinds of things are regulated bridging loans used for?
Regulated loans are used for various purposes. They can help you break a property chain, to put down a deposit on a home or to renovate a property, to give three examples. Many investors use unregulated bridging loans to expand their portfolios. They’re also used by individuals to buy new properties before existing ones have been sold to protect chains. Investors also use them to convert or refurbish properties so they can sell them on and make a substantial profit. You can’t live in a property that you’re purchased with an unregulated bridging loan.
Is it safe to trust an unregulated lender?
Many unregulated lenders stick closely to the rules laid down by the FCA for regulated loans. If an unregulated lender is part of a body or association, this makes it more likely that they’ll comply with high professional standards. Lenders that fail to stick to these standards face being removed from these organisations. This can have a big impact on their reputations.
Some borrowers prefer to use unregulated lenders as the terms are sometimes more flexible. Unregulated lenders often allow people to borrow more, and the loans can be faster to access. However, those that take out unregulated loans can face higher interest rates as well as reduced protection.
The difference between regulated and unregulated loans: things to consider
If you’re still not sure whether a regulated or unregulated loan is right for you, there are some things you can consider so you can make the best decision. Ask yourself how much you need to borrow, what you need to use the loan for and whether you’re happy with the interest rates available with each option.
If you’re taking out the finance as an individual, a regulated loan will more than likely be the best option. However, an unregulated loan could offer more benefits if you’re borrowing as a small to medium-sized business.
Whether you’re taking out a regulated or unregulated loan, you’ll need to demonstrate to the lender that you have a strong exit strategy. This means being able to show that you can pay the loan back on time and in full.
Who can help when I need a bridging loan in the UK?
If you have been searching online to find out “what is the difference between regulated and unregulated bridging loans” and feel this type of finance could benefit you, talk to us today.
At Bridge Loan Direct, we have years of experience when it comes to arranging premium bridging loans. We can provide you with tailored solutions that meet your needs perfectly. Our transparent approach has made us one of the most popular bridging loan brokers in the industry.
We can provide you with quality financing solutions whether you need finance for short-term loans for residential purchases or commercial property. Our services have helped a wide range of people to expand their businesses, get new ventures off the ground and put an end to their cash flow problems. Another great reason for choosing us is that we have a great track record when it comes to getting funds to our clients quickly. With access to more than 300 UK lenders, we can be counted on to deliver the help that you need.
