Investing in property requires more than financial resources. Successful property investment A bridging loan is a short-term financial solution designed to provide swift access to funds when timing is crucial, bridging the gap between transactions. There are many myths surrounding bridging loans, which misrepresent this adaptable and useful form of finance.
Today we are going to debunk the top 10 bridging loans myths and explain the real truths:
– Bridging Loans are a Last Option
– Bridging Loans are Complicated
– Bridging Loans Take Long to Process
– You Need Good Credit for a Bridging Loan
– Bridging Loans are Too Risky
– Bridging Loans have Hidden Fees and Costs
– Bridging Loans are Expensive
– Bridging Loans are Only for Property Developers
– It’s Better Getting a Loan From a Bank
– Bridging Loans are Only for Wealthy Individuals
Myth 1: Bridging Loans are a Last Option
Reality: Bridging loans are often seen as a strategic financial tool rather than a last resort. Bridging loans offer flexible and fast solutions, ideal for bridging short term financial gaps, and can be used as funding in a variety of situations from auction property purchases to property development or refurbishment.
Myth 2: Bridging Loans are Complicated
Reality: When people think bridging loans are complicated it is often because they are unfamiliar with this form of financing. Increasingly, reputable lenders, such as ourselves, provide support and clarity throughout the multiple stages of bridging finance. At BiG Property Finance, we’re happy to guide you through the bridging process, offering transparency at each stage. If you’d like to know more, feel free to contact us at info@bigpropertyfinance.co.uk or 0121 348 7130.
Myth 3: Bridging Loans Take Long to Process
Reality: Bridging loans are designed for speed. Unlike traditional loans that might take weeks to process, bridging loans can often be arranged in a matter of days. This makes them an ideal choice for time-sensitive financial projects, providing you access to necessary funds within days.
Myth 4: You Need Good Credit for a Bridging Loan
Reality: A borrower having good credit when applying for a bridging loan is definitely an advantage. However, as bridging loans are secured against the value of the property, bridging lenders are more concerned with the valuation, a borrower’s clear repayment plan and a suitable exit strategy. With these other factors in place, a borrower may be able to access a bridging loan despite a relatively poor credit history.
Myth 5: Bridging Loans are too Risky
Reality: Like any loan or financial instrument, bridging loans come with risks. The higher interest rates that accompany these loans and the property as a security against the loan, naturally means there is an element of risk involved with any bridging venture. However, with an understanding of the risk and a clear repayment and exit strategy, bridging loans can be a valuable financial solution for borrowers.
Myth 6: Bridging Loans Have Hidden Fees and Costs
Reality: Any reputable bridging lender will be transparent about the additional costs and fees associated with these loans. While fees vary from lender to lender, borrowers will be provided with information on: arrangement fees, valuation fees, legal fees, and broker fees before entering into any agreement. If you would like to see our fees visit our bridging loans page.
Myth 7: Bridging Loans are Expensive
Reality: Bridging loans may have higher interest rates than traditional loans, but their short-term nature and flexibility make them cost-effective for specific purposes. The key to making bridging loans work for you, is in a secure repayment strategy, to avoid extra charges. On top of this, rates are becoming increasingly competitive as the bridging market is growing.
Myth 8: Bridging Loans are Only for Property Developers
Reality: While property developers commonly use bridging loans, they are available to a broader audience. As long as a lender meets a lender’s criteria, anyone can apply. Individuals, entrepreneurs, and businesses can apply for bridging loans, making them a versatile financial option beyond merely property development.
Myth 9: It’s Better Getting a Loan From a Bank
Reality: Large banks may have strict lending criteria, making it challenging to secure a bridging loan. Alternative bridging lenders, often sourced through brokers, can offer more flexibility and assess applications on a case-by-case basis, particularly beneficial for complex deals. Moreover, bridging lenders can often process loans within a much shorter time frame, so you can access your money quicker.
Myth 10: Bridging Loans are Only for Wealthy Individuals
Reality: Bridging loans are not exclusively for the wealthy. Anyone, as long as they meet the lender’s criteria and can demonstrate the ability to repay the loan, can apply for a bridging loan. Their accessibility has increased due to competitive rates and more lender options.
