In order to properly explain the best ways that bridging loans can be used, you will first have to understand some of their basic features and properties. That is what will first be explained, therefore, and after that there will be a few examples showing some of the ways they can be put to great effect. On the whole, however, they are very useful when you are want to be able to buy something quickly, or you can't get the money from anywhere else.
One of the things that you should know about bridging finance is that you have to take out quite a lot of money. There is usually a minimum amount of about 25,000 that you have to borrow. If you only need a few hundred or thousand, therefore, these are not really going to be very suitable loans. In many cases, however, a lot more than that is required and that is fine.
The only way that any lender would be willing to lend that amount of money quickly, however, is if it is a secured loan. That is another main feature of bridging finance therefore, that you have to put something up as collateral. As it is going to be quite a lot of money involved, in almost all cases the collateral will be a real estate property. Though you do risk losing that if you default, usually some other arrangement is able to be reached when there are problems repaying the loan.
There is one final, crucial, point that has got to be made about bridging finance before we can move on to the ways in which it is useful. That is to say that it is a short term form of financing. A bridging loan will have higher interest rates due to this fact, and they make it unsuitable as a long term solution. That doesn't mean that if you need a long term loan you shouldn't use them though, in fact that is one of the main times when they are useful.
When you require a long term loan, but you need it faster than the lender is able to supply it, that is the primary occasion for a bridging loan. In fact, that is where the bridge in the title comes from, it allows you to bridge to another form of financing. So instead of having to wait until you can obtain the bank loan you want you can get a short term loan to tide you over until the bank loan is approved.
For example, let's say that you're a farmer and you want to buy some more farmland. Maybe there is some available at a very good price and you don't want to miss out. It is something that other people will be interested in as well so you really cannot afford to wait because if you do then someone else will have snapped up the land, or whatever else it may be, already.
That is the sort of situation when a bridging loan can be put to great use. When you are in a real hurry, it will normally be able to go through in no more than a few days, and even if a relatively slow pace is acceptable it shouldn't take more than a couple of weeks. After you have the bridging finance you'll be able to decide whether you will need a longer term loan to pay it off, or whether you are going to be able to do that from the purchase made.
One of the most common ways that bridging loans can be paid off without the need for additional financing is when they are for property development. As long as it doesn't take any longer than about a year to do the work necessary and then sell the property again, you shouldn't have a problem doing it that way. It would have to take no longer than about a year though because that is usually the upper limit on bridging finance.
One of the things that you should know about bridging finance is that you have to take out quite a lot of money. There is usually a minimum amount of about 25,000 that you have to borrow. If you only need a few hundred or thousand, therefore, these are not really going to be very suitable loans. In many cases, however, a lot more than that is required and that is fine.
The only way that any lender would be willing to lend that amount of money quickly, however, is if it is a secured loan. That is another main feature of bridging finance therefore, that you have to put something up as collateral. As it is going to be quite a lot of money involved, in almost all cases the collateral will be a real estate property. Though you do risk losing that if you default, usually some other arrangement is able to be reached when there are problems repaying the loan.
There is one final, crucial, point that has got to be made about bridging finance before we can move on to the ways in which it is useful. That is to say that it is a short term form of financing. A bridging loan will have higher interest rates due to this fact, and they make it unsuitable as a long term solution. That doesn't mean that if you need a long term loan you shouldn't use them though, in fact that is one of the main times when they are useful.
When you require a long term loan, but you need it faster than the lender is able to supply it, that is the primary occasion for a bridging loan. In fact, that is where the bridge in the title comes from, it allows you to bridge to another form of financing. So instead of having to wait until you can obtain the bank loan you want you can get a short term loan to tide you over until the bank loan is approved.
For example, let's say that you're a farmer and you want to buy some more farmland. Maybe there is some available at a very good price and you don't want to miss out. It is something that other people will be interested in as well so you really cannot afford to wait because if you do then someone else will have snapped up the land, or whatever else it may be, already.
That is the sort of situation when a bridging loan can be put to great use. When you are in a real hurry, it will normally be able to go through in no more than a few days, and even if a relatively slow pace is acceptable it shouldn't take more than a couple of weeks. After you have the bridging finance you'll be able to decide whether you will need a longer term loan to pay it off, or whether you are going to be able to do that from the purchase made.
One of the most common ways that bridging loans can be paid off without the need for additional financing is when they are for property development. As long as it doesn't take any longer than about a year to do the work necessary and then sell the property again, you shouldn't have a problem doing it that way. It would have to take no longer than about a year though because that is usually the upper limit on bridging finance.
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If you want to know|ToLearn a bit more about bridging loans from James McArthur, visit the best bridging lenders in the country, Bridging Loans UK.
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