If you are looking to purchase a house but waiting for the funds to become available by the sale of existing property, a bridging loan can be the best option to complete the purchase. It is a type of short-term finance designed to meet borrowers’ specific needs. Landlords and property developers usually use it to purchase a house or renovate an existing property. Bridging finance is more expensive than the other type of borrowing and helps to resolve temporary financial needs.
However, bridging debt is flexible and easy to access as compared to mortgages and traditional property loans. You can use it to purchase a property at auction, meet business financial needs, and for any other legal purpose. With the increasing demand, the number of bridging lenders is also increasing, and now many p2p lending platforms also offer bridging loans to attract more customers.
The need for bridging finance is quite pressing, but how long should you need to wait for it to complete the borrowing process? Here we are describing what you need to know.
Is Bridging Loan Right For You?
Before applying for a bridging loan, it is essential to make sure that this type of finance is right for you. In addition, you must keep in mind that its cost can rack up quickly, and it is one of the most expensive types of borrowing.
In the past, financial advisors have advocated a bridging loan as a perfect and creative solution for house purchasing. However, you should be tied to it only for a time till you receive your long-term financing. If you use it for anything else, there are chances that it could lead you to purchase something you can not really afford, and ultimately you will face difficulties in repayments.
Therefore, before taking out bridging debt, you must know your exit strategy and a backup plan. This way, you know how and when you will repay the loan amount and that you have an alternative source of revenue if your original plan fails.
Different Procedures And Policies
Like all other financial products, bridging finance’s procedures and policies vary from provider to provider. Some lenders even release funds to the borrowers within a few working days. Typically, loan applications are reviewed, decisions are made within 24 hours, and lenders ensure that borrowers know where they exactly stand in terms of eligibility.
From a general perspective, most bridging loans are underwritten within two weeks. However, some lenders are slower than others, and they can take up to four weeks to review the application, but it is comparatively rare.
It is a reason that applying for a bridging loan through an experienced and established lender is essential. You can get a loan through a broker or direct lender. When you apply through brokers, they not only match you with the top-rated lenders but also streamline and accelerate all the aspects of your application process.
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Which Factors Delay The Speed Of Bridging Loan?
Numerous factors can delay the bridging finance application. Therefore, you must consider these factors when looking to access the funds you need you to need urgently:
The Lender You Choose
Some lenders have designed their procedures in a way to complete the application process more than others quickly. So you must do research and find suitable lenders. The righteousness of eligibility checks and lenders’ capacity to deal with many applications also play a significant role in the promptness of bridging loans.
The more you are able to convince the lender, the more likely a lender is to accept your loan application. You must provide the right information, all the necessary documentation, and the evidence to support your application. Otherwise, the lender will chase you up for missing documents, which delays completing the process.
It is necessary for the lender to conduct a survey of the property you are using as security. It helps them know the market value of the property. The lender usually sends a surveyor for a detailed inspection of the property and presents their findings to the lender. This process can take a long time to complete.
The negotiation process to find the right deal can also take a long time, mainly when you apply for a larger loan amount. If applied through a broker, your broker will make a full market comparison on your behalf, negotiate and find the best lender offering competitive rates.
Exit strategy Issue
It is included in the eligibility criteria of bridging finance that you as a borrower must provide a robust exit strategy describing how and when you will repay the loan. Until a lender is 100% sure to get the money back, you are unlikely to get the funds you need.
How Can You Speed Up Your Application Process?
Although your broker or lender plays a vital role in completing your loan application quickly, there is so much you can do to speed up this process.
The key to fastening the bridging loan application process is to ask questions from your lender or broker upfront. As we have described, the things above tend to cause delay, so clarity should be provided on what is required at the beginning of the process.
Following are some questions you should ask from lender or broker:
- Is there a need for a full valuation report? If yes, ask when you can book your appointment and how much time it will take to issue a full report.
- What evidence or information is required to prove exit?
- All full searches needed, or will a search indemnity policy be enough?
- When can I get the list of underwriting requirements?
You must keep all the required documents, such as proof of identity, confirmation of exit strategy and valuation report, ready to send them immediately. If there is any delay, it will stop the progress of your application.
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Bridging finance is a short-term loan and is popular for its speed. Usually, you can get loan approval within 24 to 72 hours. If you meet the eligibility criteria and have a strong exit strategy, there are more chances of getting approval. Whether you take out a loan from a peer to peer lending platform, bridging lender or broker, we suggest you research and find a lender following the best lending practices.
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