The demand for bridging loans has increased, even though the mortgage industry is still recovering from the credit crunch that came with the pandemic. Bridging loans have always been one of the often-overlooked corners of the market business, and as such, it has seen a massive boom over the years.
A bridging loan, in simple terms, is a short-term loan used to help bridge the gap or period between two significant situations, such as the purchase of one property and the sale of another. Due to its rapid evolution, we have taken the time to list some pros and cons of bridging loans to enable you to make an informed choice.
Pros of Bridging Loans
1. It’s a quick process
The primary reason people love bridging loans is because of how quick they are to process. A typical, conventional loan or mortgage can take several weeks to process, and the waiting period comes with a lot of unrest and psychological stress for many. With bridging loans, You’re able to gain access to cash applied for in a matter of days. The speed with which these loans are worked causes them to always be in high demand.
2. Better repayment levels
When paying back bridging loans, customers are given a retained interest basis. Retained interest means that the cost is added to the total amount, making it a more affordable option for companies with many worries about their outgoing cash flow.
One of the best places to source a loan is Finbri. When choosing bridging loans from Finbri, you’re assured of a significantly flexible repayment plan. While banks have the final say on how you’re to pay back your loans, Finbri gives you many flexible terms concerning the entire duration of your loan and how your repayments should be made.
3. Relaxed lending criteria
Before one goes in for a regular loan, you need to ensure that you have an excellent credit rating, as well as a high level of concrete security. Bridging loans are available for those who might not have such qualifications. As a non-status loan, it places focus on the potential success and pride of the development for which it is collected.
Cons Of Bridging Loans
1. The high fees and high-interest rate
Bridging loans come with many fees, such as bridging fees, broker fees, arrangement fees, valuation fees, and sometimes legal fees. The high number of fees to be paid can be a significant turn-off for many, as it adds to the total amount paid.
Compared to the 5% annual payment offers on regular loans, bridging loans come with a 1-1.5% monthly rate. This tallies to up to 19% yearly payment for bridging finance.
2. Unregulated finance
Bridging loans currently do not have any form of regulation or legal protection. This means that people and companies who go in for these loans have no rights to safety from the FCA. However, all those who go in for bridging loans from Finbri are scrutinized.
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