When you need to take out a loan, there are many different options available. Understanding how the different types of loans work is essential to managing your finances. You might have heard of bridging loans, but do you know the pros and cons of such a loan?
The popularity of these loans has increased in recent years for a number of reasons. Having a poor credit score doesn’t affect your chances of obtaining the loan. Also, the loan providers are able to lend you larger sums than banks, building societies and other high street lenders. In addition the criteria for acceptance are less stringent, which means many more people can meet the requirements.
You should know that bridging loans are short-term financial situations and cannot under any circumstances be relied upon in the long-term. This is because of the higher interest rates that come with such types of loans. So if this is the case, when does it make sense to apply for a bridging loan?
A common use for bridging loans is to secure your position in a property sale transaction. There are two types of scenarios you might be faced with.
In one case you have chosen the new home you would like to buy, but have not yet sold your current home. You could just wait for your home to sell, however, this opens up the possibility of someone else buying the property you were interested in moving into before you actually manage to raise the required funds.
This is where a short-term loan will come in handy. In this instance you can take out an open bridging loan, because you don’t have a specific date that you can repay the loan. So there won’t be a set repayment date and no deadline to meet, as your house could take months to sell. However, there will be a certain period set as the window for repayment. As long as you are sure you can eventually find a buyer, this is a great way to secure your new house, before somebody else does.
In the second case, you would have already exchanged the required contracts on your home but haven’t received the funds yet. This will allow you to get the closed variety of the loan to complete the purchase of your new property quickly. Since your old home has already sold, you will know the exact date you will receive the money from the sale and be able to pay back the loan.
Timing really is important when buying and selling property. Being quick to act and sorting out your finances is even more important if you are buying a property at an auction. You can find many great bargains at property auctions, but again you need to have the required cash ready to complete the transaction. So make sure to use bridging loans to your advantage.
Once you are ready to take out your loan, you need a reputable company to borrow from. UK bridging loan or financemyhouse.net, are one of leading bridging loan specialists in the UK and are known for their fast and reliable service.