Out one point or another you may need to consider taking out a loan. But with so many different types of loans available it can be difficult choosing the right option. One type of popular type of loan is the bridging loan. Read on to learn the ins and outs of these short term loans and when it might be necessary to apply for one.
These loans have increased in use over the last few years because of a number of reasons. For those with a poor credit history it is one of the few viable loans they are eligible for. Your current credit rating will have little to no effect on your ability to obtain the loan. As the required criteria are not as stringent as other kinds of loans, many more people can take advantage of the benefits it offers.
Only a Short Term Solution
As previously mentioned, these loans are only good as a short term solutions. It should form part of a wider financial plan to deal with the situation you are in. A big reason for this is the very high interest rate attached to a bridging loan. This means it wouldn’t make any financial sense to use the loan in the long term or to continuously resort to this solution.
If you find yourself having to constantly take out one of these loans, then there is a larger problem that needs to be dealt with. A good place to go to find out more info and apply is appleloans.co.uk
Practical Use of Short Term Loans
One of the most popular uses for bridging loans is to hold together the various transactions during the sale of a property. Let’s look at two different scenarios that could use a short term loan.
In some situations you might already have the home you desire in mind, but still need to sell your existing home in order to make the move. An obvious option is to just wait until your current home is sold, but this leaves open the chance of another buyers snapping up your desired property before you can finalise the agreements and have the necessary funding.
A short term loan would be a better idea than just waiting. You could take out an open bridge loan, since you do not have an exact date for the repayment. Instead there will be a repayment period set within which you can pay back the amount you borrow as the money becomes available.
A different scenario could be that you have actually already found and confirmed a buyer for your existing property, but are waiting to receive the funds. The urgency might be because of an impending deadline to finalise the agreement on the new home, or it could be an auction purchase which doesn’t leave much time to send the payment. If you face this kind of situation, a closed bridge loan is the perfect answer. Your old home is already sold and you will know the exact date the money will be cleared into your account.
As you can tell, timing is everything when it comes to property deals. You must be able to effectively manage your finances if you want to successfully purchase the property you are interested in, and a bridging loan is often the best way to make that happen.