Bridge Direct 0
On the surface both open bridge loans and closed bridge loans appear to be the same. There is also very little information out there explaining the differences and where each are best applied. Whilst both are very similar, the little nuances between them would affect which bridge loan is the best fit for your situation.
Bridge loans offer a short term financial solution for those who have a lot of equity locked away in property or valuable assets. Many business owners and property developers will utilize bridging finance to purchase properties quickly and speed up completion. They may then use this time to secure a longer term loan like a mortgage or even look to complete the renovation and sell the property on for a profit within the term of the loan.
The duration of bridge loan would normally range from 6 months to 12 months, but this information may differ from one company to another company, and it is possible to rollup interest or strike a new deal to extend the loan period.
Bridge finance is generally used during property purchases, however this is not their sole use and bridge loans can be applied to any business application.
By using a bridge loan house owners can speed up sales chains or purchase a new property without having to rely on their current property being sold. As the approval process for bridge loans is quick and painless it can help borrowers secure properties in areas of high demand quickly, before they have managed to secure a long term loan. In some cases it is possible to receive the funds from the bridge loan in the same day.
As was mentioned before, bridge loans are not restricted to property purchases and can be used across a wide array of business applications. Commercial bridge loans like this can be used for a variety of reasons, such as helping fund the marketing of a new product, pay off a large tax bill or help to expand the business generally. In this competitive business world, businesses need to strive to stay ahead of the competition and cash flow plays a key part of this. Bridge loans help to free up capital quickly and easily, as they are a secured loan. This means that the borrower does not have to worry about the lengthy and time consuming credit checks and due diligence associated with a mortgage. Nor do they have to worry about being tied into a long high interest repayment term. Due to increased due diligence, set criteria and credit checks, in the wake of the recent financial crisis, it can take weeks or even months to a get a mortgage approval, let alone receive the funds. In these situations the sellers could look to take a better offer from someone who has the cash readily available, meaning you could lose out on the purchase.
This is where Bridge loans would come in, as long as you hold enough equity in the asset being secured against the loan, funds can quickly be released to allow maintain a healthy cash flow and allow the borrower to concentrate on more important aspects of the sale or business and not get bogged down in mortgage and bank loan applications.
However, it is important to decide which Bridge Loan to use for your application;
Closed bridge finance is generally used when the borrower has a clear repayment date or a fixed date when they would have the ability to repay the loan.
For example, if the borrower is awaiting the release of funds for a mortgage and have had clear confirmation from the bank when these funds would become available, then a closed bridge loan would be the ideal solution.
As there is a fixed repayment date on a closed bridge loan as a result the interest rates are much lower when compared to an open bridge loan, due a reduction in risk.
Open bridge loans would be used when the borrower doesn’t have a clear date when the funds would be available to repay the loan.
For example, in a buy-to-sell at an auction. The borrower may use an open bridge loan to quick snatch a bargain property that requires minimal works. They would have a rough idea of the timings involved, and when they could sell the property, but don’t have a secured date on when the property would be sold, and when the bridge loan can be repaid.
The interest rate on an open bridging loan is always going to be slightly higher when compared to a closed bridge loan. This is due to the risks the lender is taking on, and so the interest rate will reflect this.
The team at Bridge Direct are direct lenders, and not brokers. When you call Bridge Direct, you can be assured you will be speaking with the decision maker, and no middle men are involved. This is why they can offer their guaranteed instant decision on all bridge loan applications.
Bridge direct have no set criteria, accept 1st and 2nd charges and you may be eligible for a loan even if you have bad or adverse credit.
Contact Bridge Direct today, no matter you situation, bridge direct may have a bridging loan solution for you and your situation.