Top of the page

Bridging Loans

Author: Harry Jones And Facted Checked by : Shanie Capper
Last updated on : 21 May 2024

Understanding Bridging Loans

A bridging loan is a short-term financing solution often used in the property market to ‘bridge’ the gap when a traditional mortgage or loan can’t be arranged quickly enough. These types of loans can prove crucial in property transactions, allowing the borrower to secure a property swiftly without having to wait for longer-term financing to be arranged.

How Does a Bridging Loan Work?

Bridging loans, in essence, are short-term loans secured against property. They provide immediate capital for urgent transactions and are usually repaid within 12 months. Bridging loans can be arranged more swiftly than a mortgage and thus are often used to secure a property quickly, such as at auction, or to bridge the gap during a property sale chain.

Types of Bridging Loans

There are two main types of bridging loans: ‘closed’ and ‘open’. A closed bridge loan has a fixed repayment date, and the borrower typically has an exit strategy in place, such as the sale of a property. An open bridge loan, on the other hand, does not have a fixed repayment date, but is usually required to be paid off within one year.

When to Use a Bridging Loan?

Bridging loans are commonly used in property transactions, such as buying at auction, funding property development, or preventing a house sale from falling through. They can also be used for short-term business funding or during a temporary cash flow problem.

It’s important to note that bridging loans, due to their short-term and quick nature, usually come with higher interest rates than traditional loans or mortgages. As such, they should be considered a short-term solution, and alternatives such as payday loans or quick loans from a provider like My Quick Loan should be considered for smaller, non-property related borrowing needs.

Bridging Loans in the UK

UK Companies Offering Bridging Loans

Several companies in the UK specialise in providing bridging loans for property transactions and other short-term financing needs. Here are a few notable ones:

  1. LendInvest: LendInvest is a specialist bridging loan provider, known for their swift decision-making process and flexible terms.
  2. Masthaven Bank: Masthaven offers a range of short-term bridging loans with a high level of customer service.
  3. United Trust Bank: United Trust Bank provides bridging loans with a focus on speed, flexibility, and competitive interest rates.
  4. MT Finance: MT Finance is known for its speed of service and flexibility, making it a reliable choice for bridging loans.
  5. Octopus Property: Octopus Property offers a range of short-term property loans, including bridging loans, with a focus on swift, reliable service.
  6. Shawbrook Bank: Shawbrook Bank offers a variety of bridging loans tailored to various situations, including residential, commercial, and refurbishment scenarios.
  7. Precise Mortgages: Part of the OneSavings Bank group, Precise Mortgages offers a range of bridging finance options for various property transactions.

Remember, bridging loans are a significant financial commitment and should be considered carefully. When choosing a bridging loan provider, it’s essential to compare the interest rates, repayment terms, and any potential fees to ensure you’re getting the best deal for your circumstances.

FAQs about Bridging Loans UK

What are the typical uses of a bridging loan?

Bridging loans are typically used in the property market, often to bridge the gap in a property sale chain, buy a property at auction, or fund property development. They can also be used as a way to borrow money quickly for other short-term needs, like resolving temporary cash flow problems.

How quickly can I arrange a bridging loan?

One of the main advantages of bridging loans is their speed. Many lenders can agree to a bridging loan in principle within a few hours and complete the loan within a few days or weeks, making them a quick way to borrow money when time is of the essence.

How much can I borrow with a bridging loan?

The amount you can borrow with a bridging loan varies based on the lender and your circumstances. Typically, you can borrow from a few thousand pounds up to several million.

How long can I borrow with a bridging loan?

The length of a bridging loan can range from just a few days up to 12 months, depending on the specific terms of the loan agreement.

What’s the difference between an open and closed bridging loan?

A closed bridging loan has a fixed repayment date, typically when the borrower knows exactly when funds will become available – for example, from the sale of a property. An open bridging loan, on the other hand, does not have a fixed repayment date but is usually expected to be paid off within one year.

How are interest rates calculated on bridging loans?

Interest on bridging loans can be charged monthly or rolled up and paid at the end of the loan. Rates can vary significantly, typically based on factors such as the loan amount, the property’s value, the borrower’s credit history, and market conditions. Always ensure to understand the interest calculation before signing a loan agreement.

Can I get a bridging loan with bad credit?

While a good credit score will provide access to more competitive rates, it’s still possible to obtain a bridging loan with bad credit. However, the rates might be higher, and the loan-to-value ratio could be lower. Some lenders specialise in bridging loans for those with adverse credit.

Can I repay my bridging loan early?

Yes, most bridging loans can be repaid early. However, some lenders may charge an early repayment fee. Make sure to understand the terms of your loan agreement before deciding to pay off the loan early.

Can a bridging loan be extended?

Depending on the lender’s policy and your circumstances, you might be able to extend the term of your bridging loan. There may be additional fees and interest associated with an extension, so it’s essential to discuss this possibility with your lender beforehand.

Can I use a bridging loan for something other than property?

While typically used for property transactions, a bridging loan can be used for any legal purpose. However, the lender may need to approve the intended use of funds, especially if the loan is secured against non-property collateral.

Is a bridging loan right for me?

Bridging loans can be a helpful financial tool, but they’re not suitable for everyone. They generally have higher interest rates compared to traditional loans and mortgages and should be used as a short-term solution. It’s important to consider your individual financial situation, your ability to repay the loan quickly, and alternative options for borrowing money before deciding.

Bridging Loans and My Quick Loan

My Quick Loan specialises in providing quick loans in the UK. Our loans range up to £5,000 and can be a valuable resource for addressing immediate financial needs. However, it’s essential to clarify that we do not offer bridging loans, which are more substantial, short-term loans typically secured against a property.

While bridging loans are often used for large-scale property transactions, the quick loans provided by My Quick Loan can be an excellent solution for smaller, more immediate financial needs. Whether it’s an unexpected expense, a small-scale home renovation, or even a modest used car purchase, our loans can help fill in the gaps.

While bridging loans and quick loans both offer swift access to funds, they are designed for very different scenarios. Bridging loans usually come with larger amounts and are secured against a property, while quick loans are smaller, unsecured, and can be used for a wide range of purposes.

At My Quick Loan, our goal is to provide quick, transparent, and responsible brokerage services. We advise all prospective borrowers to carefully consider their borrowing needs, assess their repayment capabilities, and explore all available options before deciding on the best borrowing solution for their situation. If a smaller loan of up to £5,000 could help you navigate a financial speed bump, My Quick Loan is here to assist you.

..

Warning: Late repayment of payday loans can cause you serious money problems. For help, go to moneyhelper.org.uk.

Top