Who is the typical customer for bridging loan?, Money access advice, Finance lending tips

Who is the Typical Customer for Bridging?

13 Jan 2023

Bridging loans are a hot topic in the lending market right now. Owing to the current economic situation and the benefits of bridging finance, people are moving towards this lending option in leaps and bounds.

However, bridging finance isn’t for everyone. Therefore, as a borrower, you must know if you are the ideal customer for a bridging loan.

This article will help you remove the doubts about bridging loans and understand these loans’ criteria. Knowing some facts, you will be confident enough to find a lender in the market. So, stay tuned for detailed information.

What are Bridging Loans?

Bridging loans are short-term finance provided by specialized lenders or Peer to peer lending platforms. These loans are distinct from traditional loans such as mortgages because they are for an instant need of money.

Bridge financing is based on the idea that the borrower needs a huge sum of money quickly to expand the financial status. Not having that money for the time will affect the borrowers’ financial condition.

You need some type of collateral to approve your loan from a lender. As these loans are mostly secured, you would require establishing an asset, namely, a property.

Also, a bridging lender would provide an LTV of the total lending amount and the asset’s value. Mostly, they provide 75% LTV loans.

Another important thing about bridging loans is the interest rate. The interest rate of bridging loans is charged monthly and gets compounded.

However, you must pay the lump sum that includes the principal plus interest at the end of your loan term. The current interest rate varies from 0.45-0.6%. Also, it may change with time.

There are other fees apart from the loan amount you must pay. These fees appear to be a reasonable amount, so you must factor them into the whole equation.

Why do people want bridging loans?

People apply for loans because they have some financial issues that they want to resolve. No one borrows money for the sake of borrowing.

Obviously, there are some tasks that they want to complete. Bridging loans help borrowers in many ways. These reasons will help you understand whether you should become a customer for bridging loans.

Buy a Property:

People take bridging loans to buy a new house when their old house is on sale. Suppose you want to buy a property. You visited the market, and after much research, you found the ideal house.

You may lose the deal if you don’t have complete finance. The sellers don’t wait much when they can find a better option.

The housing market in the UK is ruthless. Therefore, you don’t have much time to wait for the finance to arrive. Instead, you can get the finance from a bridging lender to move fast with the payments.

If you have such financial problems, you are a perfect customer for bridging loans.

Win a property at an auction:

You may not want to live in the house you want to purchase. However, you may have a property business where you buy cheap properties and renovate them to sell them at a higher price.

In that case, you can go to auctions. Mostly, auctions are not on the uninhabitable property. Therefore, they are cheap.

But you can still participate if you don’t have the money to win an auction. Putting in a winning bid can help you acquire the house. In the meantime, you have to apply for a bridging loan.

As a bridge finance customer, you want instant access to money; these loans can provide that huge sum in a matter of days.

Refurbishment purpose:

Bridging customers often seek bridging loans to renovate houses or refurbish the residential building. Similarly, you can get finance to convert a residential property into a commercial one.

Unlike traditional loan options, bridging finance takes care of the timely disbursement of money so that the borrowers never go short of finances to complete their projects.

Typical customer eligibility criteria for bridging finance:

It’s important to know if you are eligible for bridging loans. These loans have specific criteria you must follow to get approved.

Security:

To become a bridging customer, you must have some assets for loan security. The asset should be a property that gives the guarantee to the lender that you will repay your loan.

If you have such a property, you can apply for bridging loans.

Exit Plan:

The customer’s exit strategy plays a vital role in the loan approval. Lenders demand a viable plan to exit the loan. Therefore, you must have a proper plan that states how you will repay the loan money.

It could be a mortgage, a house sale, or any other option that seems reliable to the lender.

The Typical Customer for Bridging – Final Words:

Bridging loans are secured or property-backed loans that quickly provide huge sums. Before applying for such loans, you must know whether you fall into the ambit of customers or not.

For that matter, you should know your reason for getting a loan. If it matches bridging loans’ purposes, you’re good to go.

Similarly, you should also know the bridging finance eligibility criteria. It will help you know if you are a typical bridge lending customer.

This article explains everything in detail. We hope your doubts will be removed once you go through them. Still, if you have any questions, let us know in the comments.

Comments on this Who is the Typical Customer for Bridging? article are welcome.