Bridging loan finance is normally used for business and commerce. Though many consider this type of secured credit is expensive, it does have its uses. To understand the usual cost of bridging loan finance, let us consider the expenses you will incur to borrow £300,000 for a short period of a month. The monthly rate you are charged depends on various factors, but mainly on the amount borrowed as against the security denoted as a percent. 70%, 80%, 85%, 90%, 95% and 100% bridging loan finance carry higher rates of interest. The percent is known as LTV or loan to value. Hence on a bridging loan of £300,000 for a month, would typically have 1.25% interest rate. This means you will pay £3750.00 a month.
The borrower can repay the loan in various options. Some choose to convert this amount into another loan, which can be repaid over a period of up to 36 months. Others choose to repay the amount every month. Another option is to take a bridging loan for an amount of about £100,000 along with an interest of nearly 2 months, meaning a total amount of £102500. This option eliminates the need to make monthly payments, however the loan and interest is paid once the specific time frame is over.
Common uses of bridging loan finance are purchasing property at auction where you need money quickly and not after months. Business ventures, purchasing another house if your present home hasn’t been sold, preventing bankruptcy or repossession, commercial businesses shifting premises and venture capital for entrepreneurs are other uses. A bridge loan can find various legitimate uses if you have sufficient equity. Bad credit history and arrears don’t normally affect bridge finance because this credit is short term and secured.