It can take weeks or even months of searching high and low to find a new house you would be happy to move into. Once you have found your dream home, you will want to make the move as quickly as possible. However, funding issues can quite often slow the entire moving process down to a crawl. Moving is stressful enough on its own, adding financial problems into the mix is not ideal.
The main problem most people face is the need to sell their current home to be able to raise enough funds to move into the new property. Having to wait to sort this out, will increase the risk of another person getting the property you had found before you can find a buyer for your old residence. What can you do if it might take some time before you have the money available to purchase the new property?
Get a decision within 30 mins is a solution preferred by many. This is a kind of short term finance that can quickly get you the money you need. The main characteristics of bridging loans are a short duration and high interest rate.
Lets first discuss the repayment period. A short term bridging loan usually has a term of 1 to 18 months. This gives the borrower the time they need to buy the new property and sell off the old one. The lender is then repaid when the previous home is sold. Any repayment instalments for these short term secured loans is usually only for the interest. The principal amount borrowed is paid back when the other transaction has completed and the borrower has the necessary funds for the full repayment.
This short repayment period does have one major cost. When compared to other loan types, a bridging loan has a much higher rate of interest. This high interest is required to make it viable to offer the loan in the first place. As the borrower needs the money urgently, then the interest rates are something that has to be accepted. The best tactic to employ is to negotiating with the loan provider, to try to get the best rates possible.
As a type of secured loan, you are able to borrow much larger amounts if needed. You can expect to be allowed to borrow in the region of 25,000 pounds and one million pounds. The main limiting factor will be the value of the collateral used to secure the loan.
A lot of other loans are very restrictive and will usually completely deny someone with a poor credit history. The great thing about a bridge loan is that it really is open to any homeowner. So it isnt as important if you have a good or credit rating. You can still apply for and receive the money that is needed, since the collateral protect the loan provider from risk and make them more likely to lend to you. Just like any other loan, make sure you know all the risks and challenges of borrowing before signing an agreement.
In conclusion, you need to be aware of the theory called ‘cash advance’ when it comes to bridging loans because the financers expect their clients to be well aware of what they have signed up for and are fully prepared for the risks that they are sure to encounter in the long run because taking a debt and clearing it in time is no laughing matter and the aforementioned points would be of great help to manage things out.
