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When individuals and businesses need to raise finance quickly they commonly think of a bridging loan as being the best option. However, although bridging loans can be put in place quickly they should only be used as a short term finance option. This is because they have a monthly interest rate that is higher than other forms of finance, in particular higher than the rates charged for long term finance facilities.
It is important to remember that bridging loans have arrangement fees in addition to legal costs, valuation fees and of course the monthly rate of interest that is charged for every month that customers have their bridging facility. If a bridging facility is going to be repaid by funds that are due in from monies owed or following the sale of a property or other asset, then a bridge facility may well be the best option. However, if the bridging loan is going to be repaid through the use of a long term finance facility, it is could be well worth while considering the longer term finance option at the start.
By finding a suitable long term facility at the start and avoiding bridging finance altogether will of course save all the costs associated with a bridging loan. There are many long term finance facilities that can be put in place quickly and can often provide the best option.
At KIS Finance we are able to source and put in place buy to let mortgages within 2 weeks from receiving the initial phone call application. This is very useful for property investors who need to complete their purchases in a short space of time following having their offer accepted. This facility is particularly useful for people buying property at auction when there is only 28 days in which to complete the purchase. For property that is in a poor state of repair or an unusual construction this is not a suitable alternative because most buy to let mortgage providers like the security property to be in a liveable condition. When buying poor condition property at auction bridging loans are quite often the best option for raising funds secured on the property to be purchased.
Another alternative to bridging finance for raising funds quickly is asset refinancing. This option can be put in place quickly and offers medium to long term finance facilities that can be secured on existing assets such as vehicles, plant equipment, machinery and other equipment.
It can therefore often be more cost effective to skip a bridging loan facility altogether and opt for going straight to the longer term finance option. To have an idea about the costs and interest charges applicable to bridging finance then please use our bridging loan calculator which will work out these costs for you.