Bridging loans have been increasing in popularity recently. The use of loans may increase by 25% in the next five years (i.e. by 2030). Additionally, unregulated bridging loans rose from 49% to 54% during the first half of 2024, indicating the huge demand among investors. 

This is because the financial facility offers the flexibility to buy a property without paying the whole amount. Instead, you may bridge the required money using the loan.  It prevents you from losing the deal. You can invest in the most profitable property without time constraints.

What do you mean by Bridging loans?

Bridging loans are short-term loans to be repaid within 12 months. Investors and Buy-to-let property buyers consider for their immediate property purchase. It is ideal for commercial and residential projects. It allows you to access funds while looking for cash elsewhere. It demands the borrower to stake a property to get the money.

It is a secured finance you get by pledging a commercial property. The amount you get depends on the loan-to-value ratio. It is the property value against the amount you need. Usually, you may get 80% of the LTV value as a loan.

Investors and buy-to-let buyers use it for multiple purposes. The ease of availability makes it a popular option. Here is what you may use the loan for:

Ø  To buy a new property before selling the existing one

Ø  Fixing a broken property

Ø  Buy a property at auction regardless of the fund's availability

Ø  Renovate a property or unauthorized one to sell it

What are the possibilities to get a bridging loan for bad credit?

Most individuals lack a decent credit history but need urgent funds. Here, they search for the best bridging loans with bad credit in the UK marketplace. Yes, you may get a bridging finance despite a low credit history.  The following tips improve the chances of getting one:

Ø  Have a clear loan exit strategy ( Can you sell the property within the given time?)

Ø  Provide genuine and regulated property as collateral

Ø  Check whether you may borrow less than what you need

Ø  Identify whether you may provide a deposit (rare circumstances)

How does getting a bridging loan by pledging assets is beneficial?

Bridging finance is usually secured against a commercial or a residential property. It depends on the purpose and the amount required. However, you must provide your owned and verified property to renovate an unauthorised one. Pledging an asset helps you reduce the interest liabilities. You eventually pay less overtime. Here are other benefits of bridging loans by staking your assets:

1)     Get a higher amount

You may get up to 75-90% of your property value as funds from bridging loans. It is usually higher than what you get for a mortgage. Both aspects work differently. You may even get a loan on a second-charge mortgage property. However, the money you get may be less than that. However, the interest rates stay competitive.

2)     Less bureaucracy to get through

Bridging loans are secured finance solutions. It does not involve much financial scrutiny for approval. You may qualify if you meet the eligibility criteria. You need to be over 18 as a UK citizen as an applicant. Anyone- self-employed, business owner, employed, and retired may qualify.

You may apply as an individual, LLP, a Limited Company, or Partnership. You must have a registered address in the United Kingdom. Check and define your exit strategy. Determine whether you want to sell the property or refinance to pay the dues.

3)     Purchase unregulated properties

Yes, you have read that right. You may purchase unregulated properties using a bridging loan. Individuals struggle to get finance for unregulated properties using a traditional mortgage. It could be anything like unhabitable housing without a kitchen and bathroom facility. However, you can use qualify if you want to use the property for investment purposes. You may not get it if you want to make it personal property.

4)     Prevents you from breaking the chain

Some financial decisions depend on the individuals involved in the chain. For example, if investing in a chain of properties, the buyers and sellers must get the dues in a timely manner. Here, each person's eligibility to buy or sell depends on the successful completion of the transaction.

For example, a first-time buyer needs a property to purchase. Similarly, he needs someone to buy the existing property. And the chain goes on. It ends when the home sells with no further chain. It means that the seller does not need to buy another property.

Here, ensuring sufficient cash flow is essential. A mere lack of it may affect the chain and the timeline to complete the project. Bridging loans may help you get instant cash here. You may use it to pay the supplier or to buy the property. It ensures smooth transactions between the parties involved.

5)     Get instant cash for the auction property purchase

If you are a business owner or investor seeking to buy a property at auction, bridging loans come in handy. It proves helpful when you must settle the whole amount within 28 days of the auction completion. It also requires you to clear some advance to claim the property as yours. Generally, if you are in the middle of selling your property, you may not have cash to buy.

Here, get bridging loans by staking your owned property. It will help you get instant cash to fund the advance and get the property in your name. Later, you can repay the dues by selling your property. You can check the best quotes by pre-qualifying.

Check monthly instalments loans with no credit check facility. It helps you analyse the approximate amount you may get on the loan. Getting a basic quote does not affect your credit history. Instead, pre-qualification grants you the power to choose right given your financial situation. However, don’t make unnecessary applications at a time.

6)     No early repayment charges   

You can repay the bridging loan early if you have the cash available. It prevents you from waiting and ruining the opportunity. It is especially ideal for businesses with seasonal sales. It eliminates the hassle of repaying the dues for an eternity. However, always consult your loan provider before paying before the agreement ends. It will help you know the associated exit fees and other conditions.

Bottom line

Bridging loans is the solution to counter property purchases without hassle. You can use it for auction property purchases, renovating an existing property, or paying the suppliers. Identify the interest you may get and ways to reduce it. You can repay the loan early without incurring any overpayment charges.