What Are Requirements For Bridging Loan?

Are you looking for funds to meet your emergency financial needs? You can get help through bridging loans that are popular all across the UK. You can easily find numerous registered bridging loan providers and p2p lending platforms offering such loans. It is not much difficult to take our bridging finance, but every bridging lender has its own lending criteria. So you have to search and shop around to find a lender that meets all your needs. 

Bridging loans are short-term sources of financing, usually between 3 to 12 months. These loans are popular due to the speed of arrangement and several other benefits, such as quick access to funds, no exit fees, and flexibility in credit rating. If you want quick approval, you have to meet all the basic requirements of the lender. 

Here we are describing the most common eligibility criteria that lenders evaluate. 

What Are Requirements For Bridging Loan?    

The exact bridging loan criteria you need to meet may differ from lender to lender. It means that it is possible that your loan application may be rejected by one lender but accepted by another. 

Although precise bridging loan requirements differ, most lenders have the same overarching criteria. It typically includes: 

Loan Security

Bridging loans are secured loans which means you need to use any of your valuable assets, usually a property, as a security against the loan. Typically, lenders ask you to put down one or several properties depending on the amount you want to take out. If you are unable to repay the loan amount, the lender has the right to repossess your property and sell it to get the loan amount back. 

Credit History 

Unlike mortgage loans, bridging lenders do not consider the borrowers' credit history. It is beneficial for borrowers with poor credit scores because standard banks and mortgage lenders do not provide loans to such borrowers. Bridging lenders only consider your security property and exit strategy. However, borrowers with good credit scores are able to get cheap rates and the best deals.             

Exit Strategy       

An exit strategy is the most important part of bridging loan criteria because it shows the lender how you plan to repay the loan amount. When you have a strong exit strategy, you will be able to secure a loan at affordable rates. Following are some common exit strategies: 

Sale of property:

You can repay the loan amount once your property is sold. 

Refinancing:

You can switch to a traditional mortgage or specialist property loan and use some cash to repay your bridging loan. 

Property Flipping:

This exit strategy is used when you want to renovate a property and sell it for a profit. 

Development:

When you buy a large residential property development to rent out or sell each unit. 

Cash Redemption:

Using your future funds to pay bridging loan amounts. For example, using the money, you get in inheritance.  

 Loan Term And Size:

Most bridging lenders offer a maximum loan to value of 70%, but some lenders also offer 80% LTV. Generally, the minimum loan size is £10,000. 

Only a few lenders offer 100% LTV, but you have to put in additional security to take out such loans.   

The term duration is usually between 3 to 12 months but now bridging lenders offer loans for a longer time, such as 36 months. 

Property Type:

Bridging lenders accept a wide range of properties. Even uninhabitable or properties in poor conditions are also acceptable.   

Age Of Borrower

If you want to take out a bridging loan, you must be 18 years old. The maximum age of borrowers varies from lender to lender. Some lenders have a maximum age limit, while others do not have any limitation for age and offer loans to borrowers with age 70 and over.

Proof Of Income  

Unlike mortgage loans, proof of income is not a very important factor for bridging lenders when assessing bridging your loan application. It is because you need to have a viable exit strategy to prove that you are able to repay the loan.  

There are many other factors that bridging lenders consider as a part of their eligibility criteria. These include: 

• Experience of borrowers in the property market.

• Employment status. 

• Condition of the property you purchase.

• Minimum turnover.

All lenders are not limited to these factors and requirements, so you have to check eligibility criteria when you choose a lender. 

Purpose Of Bridging Loan

You have to tell your lender for which reason you want to take out a bridging loan. You can apply for bridging finance when you are: 

• Purchasing a property before the sale of an existing one.

• Buying a property at auction. 

• Buying a property in poor condition to renovate and sell. 

• Financing a development project.

• Buying a deferred consideration. 

• Fixing a chain break. 

Alternatives To Bridging Loans  

Suppose you think you have to struggle to meet the eligibility criteria for a bridging loan or have already had an application rejected. In that case, you can explore other options available besides bridging finance. The alternatives available depend on whether you want a loan for commercial or residential purposes. You can take out unsecured loans or commercial mortgages to fulfill your financial obligations. 

On the other hand, if one lender rejects your bridging loan application, you can go to another lender. It is essential to make a comparison to find a lender offering loans on your terms. 

Conclusion

Bridging finance provides quick funding compared to other forms of borrowing. However, you have to keep in mind that the interest rate of bridging loans is higher than traditional mortgages. To secure a loan at an affordable rate, you must meet the eligibility criteria as much as possible. The most important thing for bridging lenders is your exit strategy. The stronger the exit strategy, the lower rates you can get on bridging loans.    

Numerous lenders and p2p lending platforms offer bridging finance; you can make price comparisons to find a lender that meets all your requirements and offers suitable rates.