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Conventional Bank Loans vs Bridging Loans

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Often many people are unsure about using Bridge loans as a viable source of funding over a regular high street mortgage or bank loan. Both loans types have their merits and dependent upon your situation may determine the best route for funding. 

Conventional Bank Loans

Conventional lenders, such as banks or building societies will be required to follow strict guidelines on determining qualified borrowers. This will involve passing an initial set criteria and subsequent credit checks. Due to the recent economic crisis, the banks are still recovering and therefore these criteria and checks have been ramped up to ensure they are 100% confident on getting their money back. This means that anyone looking to get a loan for the first with a low credit score, will find it hard or impossible to secure a loan with a bank. Likewise, if you have any previous bad or adverse credit history, then you will probably find you won’t pass the first stage of checks.

Add to this the time it takes to pass all the checks, assessments and due diligence, it can take weeks, or in some cases months, to get approval for a loan, let alone get your hands on the funds.

Bridge Loan Lending

However, unlike conventional bank loans or mortgages, bridge loan lenders are able to set their own criteria and credit checks. Many bridge loans brokers will contact a number of lenders and offer loans based on their return after introducing their markup, as a result these are normally take longer to complete and also incur inflated interest and admin charges.

By approaching a direct lender, such as Bridge Direct, over a broker, not only can you cut out the middle man, but you are open to potentially striking a better deal.

As bridge loans are a secured loan, you will need a property or asset to secure the loan against. The amount you are able to borrow will depend upon the equity you hold in the secured asset and this will serve as the benchmark for the cap rate for the loan.

Generally, bridge loans are short term funding solutions, with a duration of 1 to 12 months, however it is possible to renegotiate and strike a new deal before the term on the existing loan ends to increase the duration.

Bridge loans have for many years been associated with property developers who will use a bridge to help secure the property until they secure a mortgage or sell the property within the bridge term to bypass the need for a long term loan completely. However, bridging finance can be used for any business application, and can be used for other funding areas such as;

  1. Funding large projects.
  2. Paying off large tax or vat bills.
  3. Maintaining cash flow until customer invoices are paid.

 

As with most short term loans, the interest rates are generally a little higher than that of a long term loan such as a mortgage or bank loan. But if you take into consideration the advantages they can provide, this additional interest can more than be negated. These advantages include;

  1. Not being tied into a long term repayment schedule.
  2. Not having to make regular monthly repayments, as the loan is repaid in full at the end of the term.
  3. Not requiring the extensive credit checks or due diligence associated with a bank mortgage.
  4. No set criteria required to be accepted for a bridge loan.

Bridge Direct Bridging Loan Solutions

With a bridge loan from Bridge Direct, each deal is assessed on its own individual merits and the best possible interest rates are given based on you and your situation. You may still be eligible for a bridging loan, even if you have bad or adverse credit. 

Bridge Direct have over 30 years’ experience in the bridging and financial sector. When you call Bridge Direct you can be assured that you will be speaking with one of our decision makers and no middle men are involved. This is why they will give you a guaranteed instant decision on all their bridge loan applications.

No matter you situation, Bridge Direct may have a bridge loan solution for you and your situation. Call Bridge Direct today for your free instant decision now.


Tags: Bad Credit Finance, Bridge Loans, Bridging Loans, Commercial Bridge Loans, Conventional Bank Loans, Short term bridge loans

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