What You Need To Know About Bridging Loan Rates

May 7, 2012 by  Filed under: Loans 

What are bridging loan rates, you say? These are the interest rates that you will be paying along with the actual loan itself, which varies according to the type of loan you will use – open or closed bridging loan, and depending on how long you wish to borrow the money for.

With an open bridging loan, the existing property may not have been carried out in the market yet, but the client is already considering of buying a new property. Therefore, the bridge is still open. To lenders, this type of bridge has higher risk as there is a possibility that the property sale would fall through. In a closed bridging loan, on the other hand, usually the existing property of the applicant is ready for exchange on the market. This is more favorable to lending companies as this has lower risk levels for them. So are far as varying rates are concerned the a closed loan is more favourable than a open loan therefore commanding lower rates.

Now that we have known what bridging finance rates are, let’s talk about the rate itself. Most people who are interested in getting a bridging loan know that these rates are high in comparison. By high, we mean it is higher than the possible interest rate you will be paying on a long-term loan. The reason behind this is plain and simple – it is a brief-term loan. Lenders need to raise the interest rate so that they can create profits even if they have provided funds for only a short span of time.

Moreover, the borrower is certainly not required to pay the loan back soon if it is indeed not costly than a lengthy loan. In this case, the choice is all yours. If you do not pay the loan back in time, the assets you listed as collateral or security will be retrieved. And because a great deal of cash is at stake here, usually an amount not lower than $25,000 determine that you will get the property or your business back. Lending companies have plenty of options here, but normally, they prefer to have your most valuable equipment or property as collateral. This type of loan is most always a secured loan against property or assets.

Despite of the fact that bridging finance rates are higher, you still have the opportunity to make it somewhat lower. All you need to do is to provide a proof that there is a very little chance for you to not pay back the loan in time. Usually, certain paperworks that prove your ability to pay the loan would suffice along with added security.

The bottom line? It all comes down to the levels of supply versus demand. If the companies happened to encounter numerous risky loans, then they would have to deal with all the hassles of selling off the collateral used. Most companies prefer a smoother transaction with the borrowers, that is why they make more funds available for this type of loan. And when the fund supply is greater than the loan, the rates tend to go down – same with what happens with any product or service we see on the market today.

Sunrise Commercial are a commercial loans brokerage in the UK who offer great bridging loan rates for people looking to raise money to buy auction property.

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