Where land or property is involved, the exit strategy is usually a sale or a remortgage and the lender will want to see evidence that your exit plans are achievable beforehand. More often than not, you aren’t required to make monthly repayments. ![]() How this form of borrowing worksĪs we’ve touched on already, bridging loans are offered on an interest-only basis – which means you don’t have to make any capital repayments until the end of the term – at relatively high rates, usually secured against a property or other asset as a first or second charge, and the debt is settled by the borrower’s exit strategy. When the works have been completed, the proceeds from its sale can be used to settle the loan. Once you’ve proved you can achieve those plans, they will release the funds (subject to eligibility checks), allowing you to buy the property. Let’s say you’re planning to buy a property at auction, renovate it and sell it afterwards. To be approved for a bridging loan, you will need to evidence a strong exit strategy to the lender and convince them that it will pay out within the set time frame. Interest rates are typically high compared to other financial products, but bridge loans are often much quicker to arrange than mortgages and secured loans, and the terms can often be more flexible. Bridging loans are short term, interest-only loans designed to either ‘bridge’ the gap between an incoming debt and a mainline of credit becoming available, or provide a borrower with capital to fund a project when timing is of the essence.
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