Learn More about Some of the Most Common Uses of a Bridging Loan

Money

With the strain put by the current economic context on people, there is a common tendency for many to get a bridging loan. In the past, these loans were used to purchase a new home before the sale of the old one. But those times are long gone. Nowadays, bridging loans can be taken for the fulfillment of many other purposes, out of which the most important ones will be presented in this article.

Auctions

People that acquire property at auctions are usually given a deadline of 28 days to finalize the process. However, most of the borrowers cannot complete the payment within this time period, since conventional financing solutions are rarely available in due time. With a deposit already paid, it is important that the rest of the money be paid within the deadline. This is the point where a bridging loan can help. Once you have agreed with the lender on all the terms, the money transfer will be performed in a matter of days.

Buying Undervalued Property

You may need additional funding when you want to buy such a property. A regular lender should not be approached with a proposal to acquire the property at undervalue, because they will only take into account the purchase value. On the other hand, bridge loan lenders consider the value of the property, and not the purchase price.

Relief of debts

It is not uncommon for business people to get into financial difficulties because they encounter problems with their cash flow. Such issues are the result of trading problems and can even be caused by the appearance of some unexpected tax demands. In such situations, a bridging loan can be the perfect solution.

It is important to remember that the activities of bridging lenders are not being governed by any self-regulating body. This makes them a bit risky. For instance, you should know that bridge lenders, just like any other lender, practice penalty interests for those who are late with their payment. The penalty interest rate can be extremely high when compared to the original one. Therefore, you have to make sure that you avoid any late payments. Last but not least, as a borrower, you should also keep in mind that many bridging lenders impose a minimum loan term, which can range from 1 to 3 months. Try to get an accurate perspective on the exit and redemption fees.

To conclude with, a bridging loan can be of great help in various cases, but, just as with any other loan, you must make sure you act responsibly when it comes to paying back the money you owe.

This entry was posted on Tuesday, April 24th, 2012 at 4:00 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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