Bridging Loan – Applying, Qualifying, Using

Perhaps you're an individual hoping to buy a new home but still waiting for your old one to sale, you may have difficulty securing a traditional type of home loan.  You'll likely need a good down payment, one that you won't have until your first home sells.  Or maybe you're a business owner with a huge deal set to close in a few months but in need of cash flow for your business right now.  For these problems and others like them, taking out a bridging loan can be the best way to get the finances that you need quickly. 

In order to apply and qualify for a bridging loan, you'll have to prove that you will have the means to repay the debt.  Most loans of this type are written for six months to two years, with less than a year being the average.  When the time is up, the loan will have to be repaid in full.  If you're taking out a loan for a new home, you'll likely have to put up some type of collateral against the loan and show that you can repay the loan even if your home doesn't sell by the end of the loan period.  Of course, small short term loans of just a few thousand pounds can be given as well and will be easier to qualify for.

When you take out a bridging loan, you can expect to pay more fees and charges than you would with a normal loan.  And it is also very likely that your interest rates will be higher than a traditional loan will be.  But there's a good reason for this, and that is that the loan company is taking a bigger risk by loaning you the money in this short term manner.  But it is well worth noting that unlike many other types of loans most of these loans don't charge you a fee or penalty if you pay back the loan early.   

There are plenty of other uses for gap financing as well.  Construction firms often use them in emergencies where other financing fails but a project needs to move ahead.  And individuals may need them to take advantage of unbeatable deals that are only offered temporarily.  Whether you're the owner of a business who needs to buy out your partner quickly or an individual who just found the deal of a lifetime on a home, using a bridging loan can help solve your issue and tide you over until you can secure a more permanent form of financing.