Bridging Loans & One of Its Alternatives What We Need to Know
Harry October 11, 2022

Bridging loans buy you time.

Yes, if you learn more about these loans, then you will be happy.

Bridging loans are pretty fantastic to use. They get you the backup that you badly need. They help you in gaining capital if you are running a business. They do a lot to ‘bridge the gap’ between one financial problem and then the other.

When speaking about Bridging Loans, we can consider one simple fact.

You have to understand if you need these loans. Not everyone requires a bridging loan. Not every situation wants a loan of this kind to solve the problem. But when we are aware of a particular issue to which we find the bridging loan to be a worthy antidote, we can finalise it.

Like other loans, such as personal loans, bridging loans also find themselves with direct lenders. If you get a direct lender, you get a bridging loan.

What do these loans mean to us? And why would we need an alternative to it?

Well, we can try searching for the answer in this blog.

Let’s Know the Basic Idea of a Bridging Loan at First

Loans are great, and when it comes to a loan of this type, you might gain even better advantages.

We need to learn how.

A bridging loan or a simple bridging finance solution is primarily a short-term secured loan that is offered to secure payments between two transactions. One of them might be buying a new house while the other one is selling the old one. Both the usual borrower and businesses use the loan.

As you have already found the word ‘secured’ in the above-mentioned lines, it is easy for you to understand that the loans would expect collateral. Although a bridging loan primarily considers a home or a real estate property as collateral, you may also make do with other assets, such as your car.

The term duration of this lending option varies somewhere around 1 month to 18 months.

When one needs to buy a home while the payment from the already sold house is delayed, one may take the help of a bridging loan.

For businesses, a bridging loan is usually considered a loan for raising capital for a future business plan or strategy.

See, in both ways, you are able to get a lot from these loans in general. However, there are things we need to know. So, bear with this post and learn a few interesting facts about it.

What’s the Difference between a Bridging Loan and a Personal Loan?

Well, personal loans are unsecured loans. You don’t need collateral for a personal loan. They also come with a free choice of utilising the money in any way you want.

Bridging loans aren’t working that way.

When you take out this loan, the first difference about it is that it needs collateral, typically your home or other assets like your car etc. Due to being a loan with a fixed purpose, the utility of the money is pointed towards a particular application. It means you may not get the spending freedom as much as you get with a simple personal loan.

However, it is not so restricted, and you can diversify the spending of the money if you are open to frank communication with your direct lender.

These loans might come at a higher interest rate. But that doesn’t mean a higher interest rate isn’t affordable, considering the presence of flexible repayment options.

However, bridging loans for mortgages have some perks you miss. They are:

  • It is easier to get these loans because of the paperless application process and quick approval of the money.
  • Yes, you need a good credit score to gain a loan. But it does not mean you cannot get it with a low credit score too. Your income statement and stability are enough to get the loans sanctioned from direct lenders.
  • Due to being short-term, it also helps you maintain a stress-free mind as the loan terms get over soon.

Well, lenders can tell you more about this.

But why do you need an alternative to this loan?

Let’s find that out then…

A Good Alternative to Bridging Loans: Remortgages

To tell you the truth, a remortgage can be an efficient loan option (secured, of course) in order to get extra lending assistance rather than a bridging loan.

A remortgage offers a little longer term for repayment. However, it is also a loan option that makes sense when you want a mortgage that gives you some flexible perks.

Remortgages are another mortgage loan that you often take out as a way of extending your loan terms. You can choose your existing lender or another lender to take out a loan of this kind. You can consider this an effective alternative for bridging loans because of its popularity and usefulness in terms of lucid loan terms and repayment plans.

Borrowers use a remortgage for the following advantages:

  • It is a good alternative to a bridging loan.
  • You can take out a remortgage anytime you want to for funding extensions in projects.
  • Many homeowners use a remortgage option to release home equity. This aids in freeing up some amount of cash money.
  • One can smartly use this loan to consolidate multiple debts into one to get a simplified interest rate and repayment duration.
  • You might get lower interest rates.

It takes a while to get a remortgage sanctioned – about a few months – but you can easily manage that, considering the perks you get with this loan.

To Conclude

Which one do you need? Is it a remortgage or a bridging loan?

Well, the answer depends on the borrower. If you are on the lookout for a financing solution within a short period and you don’t have a problem bearing moderate to high-interest rates, you can definitely go for a bridging loan.

One good piece of advice for taking out a bridging loan is that you have to be sincere and assured about the money you will need,

However, if that is not the case and you think you can end up requiring more money for future projects or their extensions, then remortgage will be a better option. You can also gain a lower interest rate compared to a bridging loan. Yes, lenders might sanction the loan, taking a bit of time. But that’s worth it considering perks like the said interest rates.

Even if you face issues after this, always choose to speak with your lenders.

We are always available for that.