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As an alternative to traditional bank finance, short term loans often referred to as Bridging Loans are becoming increasingly popular with landlords, developers and homeowners alike to ‘bridge’ gaps in funding. Examples include:
- Securing the purchase of a property before the sale of another
- Purchasing a property not suitable for a conventional mortgage
- Completing an auction purchase within required timescales
- Finishing off refurbishment works and/or minor developments
- Refinancing and/or consolidating existing debts
A Bridging Loan is a short-term secured loan, usually with a repayment term of between 6-24 months. Typically offered by smaller, more nimble lenders, Bridging Loans offer a faster way to access finance without having to deal with the long waiting times and layers of bureaucracy associated with institutional lenders.
However, the trade-off is that Bridging Loans are more expensive than conventional mortgages or term loans, so it important that borrowers have exit-plans in place to ensure repayment of the Bridging Loan as early as possible.