The Right and Wrong Times to Use Bridging Finance

December 5th, 2013

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Many investors and home-buyers are aware of the benefits of bridging finance. However, a bridging loan should be used only in the right situations.

Here are some of the right and wrong situations from Property Reporter in which you should be using bridging finance.

Bridging loans explained

Bridging finance options are short-term loans commonly used to finance urgent property purchases. Sometimes bridging loans are used to cover other types of temporary shortfalls. Bridging loans can be excellent financing options for investors, but they should be used correctly to avoid costly outcomes.

Using bridging loans

Borrowers should have a clear exit strategy, as bridging loans are designed to be short-term, temporary options for borrowers. The borrower should avoid borrowing without setting a realistic timeframe for exiting or paying off the loan. Without a realistic timeframe, the borrower could find that they need to extend the loan, which can be expensive.

Borrower should conduct due diligence, understand the interest rates and fees that apply and take time to find the right product and lender for their loan.

All of these factors can make the difference between a costly loan and a successful bridging-loan experience.