Bridging loans and medium term finance options
The amount of money being lent out through bridging finance is most likely going to increase further throughout 2012. This in many ways is good news for future customers who will be taking out a bridging loan. This expected increase continues the rise in bridging finance that has taken place over the last two years, very much the exception to finance in general, the supply of which has decreased since the credit crunch.
Like other forms of finance the requirements for obtaining bridging finance has become more stringent since the credit crunch, however bridging criteria is nevertheless much more flexible than other methods of borrowing. Many bridging loan facilities allow for a poor credit history and are also flexible in affordability because bridging loans are only for the short term. The type of security used to secure bridging loans can also be more diverse, in that certain property unacceptable to the more mainstream lenders maybe perfectly acceptable to a bridging finance provider. For example property that is in need of rebuild or of an unusual construction.
The toughening lending criteria that has made it difficult or impossible for many customers to obtain finance from the mainstream lenders is one reason why bridging loans have become more popular. Being unable to find finance from their normal sources, customers have looked elsewhere, leading some of them to opt for bridging finance.
The rise in demand for bridging loans and potential profits has encouraged more bridging providers to enter this market, and existing providers to expand their lending. With more bridging providers offering more bridging finance this is great news for customers. Increased competition will lead to better deals for customers, along with improved service and more options with regards to lending criteria and terms and conditions.
For people looking for a short term loan having the bridging finance providers has proved to be a very welcomed alternative to the mainstream lenders. However, for people looking for long term finance there isn’t really any great long term borrowing options that have more flexible lending criteria. As for medium term finance some of the bridging providers are starting to offer medium term facilities of up to 3 years. Although their underwriting is not as flexible as it is for their bridging loans, in particular they are concerned about affordability and how the loan is going to be repaid along with any monthly interest payments, they are providing serious finance alternatives.
Short term loans which are available quickly and with flexible lending criteria can be a better alternative to a bridging loan. For customers who require finance for the short term but are unsure about when their funds to repay a bridging loan will be available, due to for example waiting for their property to sell, a short term loan can provide more breathing space in addition to being a cheaper option. This is particularly important when a bridging loan is reaching the end of its term, because no one wants to be in the situation of having to accept a low offer on a property due to it turning into a distressed sale!