Short term and medium term loans

For many years people have been using bridging loans as a short term finance solution when money is required quickly but only for a short period of time. This has almost been traditionally for bridging a gap in funds during the purchase of a new home and the sale of an existing home when completion of the sale and purchase can not be arranged for the same day. A bridging loan is able to provide the funds required to complete the purchase before the sale of the existing home has completed. Later, when the sale of the old home has completed the bridging loan will be repaid.

If finance is required for a short period of time a bridging loan can often be the best option because set up costs and early repayment charges can be cheaper than long term finance alternative. When taking out bridging finance it is very important to take into consideration that a bridging loan should only be used as a short term method of finance. This is because they usually have a high rate of monthly interest and are therefore a very expensive long term option. In addition the bridging lenders will want their money back at the end of the agreed term, and being unable to do so will incur more costs and possibly lead to the loss of the security property.

However bridging finance can be used for many reasons and since the credit crunch there has been an increase in the number of bridging loans being taken out when other types of lending has substantially reduced.

Bridging loans can be arranged very quickly because they have flexible lending criteria. The bridging finance providers take into consideration the value of the property or properties that are being offered as security, plus the method by which their loan will be repaid. This flexible lending criteria means that less processing needs to be done which saves time. It is also this flexibility that has partly led to the increased lending for bridging finance, as more people turn to bridging finance as an alternative to the banks who have much greater restrictions.

Unfortunately many people are turning to bridging loans because they are the only option and not because they are the best option. Some bridging lenders are starting to provide medium term finance in addition to short term loans. This is because they have seen a rise in demand for finance facilities for terms of between 1 and 3 years that also offer the flexible underwriting that is associated with bridging finance.