TECHNICALLY speaking, you could argue that bridging loans and secured loans are not just similar, but the same.
This is because a bridging loan is a specialist type of secured loan, which sits alongside countless other financial products within the same category.
There are important differences between bridging loans and conventional secured loans to take into account. Particularly when short-term funding is required quickly and affordably, bridging finance is often an unbeatable option.
What is a Secured Loan?
The term ‘secured loan’ refers to any kind of loan that is issued on the basis of the borrower providing security (aka collateral) to cover the cost of the loan.
In a typical example, a borrower with a home valued at £200,000 could use their property as security for a loan of £150,000 (at 75% LTV). The most common type of secured loan is a mortgage, wherein the property the applicant is purchasing is used as security for the loan.
There are also various other types of specialist secured loans available, which include commercial mortgages, business loans, bridging finance and more.
What Are the Benefits of Secured Loans?
The biggest advantage of secured lending is the potential for eligibility requirements to be comparatively relaxed. Just as long as the applicant has viable assets of the required value to cover the costs of the loan, acceptance is likely.
Even where issues are encountered with credit scores, proof of income, employment status, bankruptcy and so on, it is still perfectly possible to qualify for a secured loan without adequate collateral.
In addition, secured lending is considered a ‘lower risk’ option by most lenders, paving the way for competitive interest rates and lower overall borrowing costs.
What is a Bridging Loan?
One of several specialist types of secured loans, bridging loans are designed to ‘bridge’ short-term financial gaps in time-critical situations.
Bridging finance provides investors, developers, businesses and everyday applicants with the opportunity to access significant sums of money within a matter of days. The total balance of the loan is subsequently repaid a few months (up to one year) down the line in the form of a single lump sum payment, including interest and borrowing costs.
The fast-access financial products are ideal for funding urgent outgoings, such as purchasing a property at auction or meeting an unexpected tax bill.
What Are the Benefits of Bridging Loans?
By a considerable margin, bridging loans are among the quickest and easiest of all types of secured loans to access. From application submission to receipt of the money required, the whole thing can take as little as 3 to 5 working days.
In addition, the fact that bridging loans are a form of ultra-short-term finance means that interest rates and borrowing costs can be kept to absolute minimums. A competitive bridging loan can often be accessed for less than 0.5% per month.
As with most types of secured loans, bridging finance is open to applicants with imperfect credit scores, history of bankruptcy and so on. It is also possible to secure a bridging loan against a comparatively wide variety of assets, including all types of properties in various states of repair.
Call For a Quote…
Whether you’re ready to go ahead with a bridging loan application or simply exploring the available options, we are standing by to take your call.
Contact a member of the team at UK Property Finance anytime for an obligation-free initial consultation.