A bridging loan is a short-term loan designed to help facilitate certain financial situations that require a relatively large amount of cash for just a short amount of time. Bridging loans are usually secured against collateral such as your home, and come with relatively low interest rates, but relatively high penalties for not repaying on time.
Bridging loans – things to consider
As it’s normally a short-term fix, a bridging loan itself isn’t really a debt solution, but it can form part of a debt repayment strategy.
If you live in a large house, and you’re thinking about downsizing to reduce your mortgage repayments, then you might try to sell your (more valuable) property and buy a (less valuable) property. If your purchase proceeds smoothly but your sale doesn’t, then you can be left with a decision to make; do you cancel your purchase, or proceed with your purchase, regardless?
If you proceed with purchasing your new property before you have sold your ‘old’ one, then you need short-term funds to buy your new property while you find a buyer for your home. This is where a bridging loan can help ensure you don’t miss out on your new purchase.
Frequently Asked Questions about Bridging Loans
- How can bridging finance be used as part of a debt solution?
- Can all property types be used to provide the security needed to take out bridging finance?
- How long can bridging finance be taken out for?
- If I’ve got a poor credit rating, what are my chances of getting bridging finance?
- How much interest is charged on bridging finance?
What are the risks with bridging loans?
A bridging loan is normally secured against your home. Additionally, not repaying the bridging loan within the agreed term (which might only be a few days) can be expensive, with high penalty charges. This makes a bridging loan a high-risk financial product, particularly if you have unmanageable debts to start with.
The ultimate risk is that if (as is normal) your bridging loan is secured against your property, then this may result in legal action that can lead to your home being repossessed.
Thinking about a bridging loan?
A bridging loan strategy is considered relatively risky as part of an overall debt repayment strategy but it might still be a suitable option for you. However, there may well be even more suitable debt solutions available, depending on your needs.
For more information on using a bridging loan as part of a debt strategy, call Payplan Financial Services FREE on 0800 980 4140 or use the
Not right for you? Read about other debt solutions that may suit you better: Trust Deed, Sequestration, Debt Arrangement Scheme (DAS), Low Income, Low Assets (LILA), Buy-To-Let Mortgage, Remortgage, Debt Management Plan, Full & Final Settlement, Self-Managed Arrangement, Equity Release, Debt Consolidation Loan.