Four Major Myths about Bridging Finance
11 October, 2021
Bridging loans really came into their own during the COVID-19 crisis, when consumers and businesses alike were forced to consider alternatives to conventional High Street loans.
But even today, the subject of bridging finance is one of myriad myths and misconceptions.
To illustrate the point, here are just four of the most common untruths about bridging loans:
#1 Myth - Bridging Finance Costs Too Much
Bridging finance can be highly cost effective. This myth stems from the fact that bridging loans attach interest on a monthly basis. In the unlikely event that a bridging loan is left unpaid for several years, then yes, overall borrowing costs could be comparatively high. A bridging loan taken out over the course of a few months with a monthly interest rate of less than 0.5% is hardly extortionate. The faster a bridging loan is repaid, the more affordable the facility becomes. Ideal for a wide variety of short term purposes where urgent funding is essential.
#Myth 2 - Bridging Loans Are Dangerous
The term 'dangerous' is ambiguous and misleading at the best of times, when used in reference to financial products. What defines 'danger' is debatable to say the least, though no definition of the word applies where bridging finance is concerned.
Bridging finance is no different to any other type of secured loan; you borrow money against your current assets, you repay the loan at extremely competitive rates of interest and the transaction is complete within a few months. Your assets are at risk of repossession if you fail to repay your loan, but this is the foundation of all types of secured lending and commercial finance in general.
#Myth 3 - You Can Only Use Bridging Loans to Buy Property
A bridging loan can be used for almost any legal purpose whatsoever. Most banks and lenders issue commercial loans and secured loans with limited scope for allocation of the funds. With bridging finance, the funds accessed can be used for any kind of purchase, investment or cost-bridging purpose whatsoever.
Bridging loans are most commonly used for purchasing property, but can also be used for covering short-term cash flow issues at work, helping new business ventures get off the ground or covering the costs of renovations to increase the market value of a home or business before selling it.
#Myth 4 - Short Term Finance takes too long to Arrange
One of the biggest points of appeal of bridging finance is how quick and easy it can be to arrange. Depending on the requirements of the applicant and their financial circumstances, the funds needed could be accessible within just a handful of working days.
Bridging finance can therefore be uniquely beneficial for covering urgent expenses and taking advantages of time-limited property purchase opportunities. Certainly more so than a conventional property loan or mortgage, which at the best of times can take several weeks or months to arrange.
Discuss your requirements today with UK Bridging Loans.
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