The market for bridging loans in the United Kingdom has grown exponentially over recent years. Attracted primarily by the lowest average bridging loan rates to date, businesses and everyday borrowers alike are flocking to the doors of specialist lenders.
Flexible, affordable and accessible within a matter of days, bridging loans provide a welcome alternative to more restrictive bank loans and mortgages. But how much does it cost to take out a bridging loan? On average, how much can you expect to pay in overall borrowing costs if you decide bridging finance is for you?
Typical Fees and Interest Rates
As with most financial products, there’s really no such thing as a ‘typical’ bridging loan. Nor is there a ‘typical’ bridging loan cost to speak of.
One of the key benefits of bridging finance is its flexibility. In accordance with the requirements and budget of the borrower, bridging loan terms can be tailored accordingly.
Depending on the lender you work with, monthly interest rates on a bridging loan can be as low as 0.43%. Some lenders charge an initial arrangement fee of 1%, assessment fees may also apply and other administrative expenses may be incurred. By contrast, many lenders ensure that all additional and unnecessary fees are eliminated entirely.
A point that underpins the importance of conducting a whole-of-market comparison, before choosing your ideal loan from a competitive lender.
Using a bridging loan online calculator can help provide an indication of the overall borrowing costs you’ll be looking at for the bridging loan you need. Nevertheless, you’ll need to consult with an independent broker to gain the clearest possible picture of the options available.
What Can Affect the Cost of a Bridging Loan?
For the most part, bridging loan costs are affected by the factors that influence more traditional loans. The difference being that with bridging finance, there’s far more flexibility and room for manoeuvre.
Nevertheless, keeping the costs of any bridging loan as low as possible means being mindful of the following:
The lender you work with. Carrying out a whole-of-market comparison will ensure you find your ideal loan from the most competitive lender in the UK. The more deals and lenders you consider, the more you’ll save on overall borrowing costs.
When the loan is repaid. As with any loan, the faster the balance is repaid, the more affordable the transaction. If possible, it’s worth considering repaying your bridging loan at an earlier date.
The size of the loan. Loan size can also affect borrowing costs and the general terms attached to the agreement. Borrowing more often means paying less in monthly interest, though this isn’t always the case.
Your financial position. Your financial history and position at the time you apply for the loan could affect both your eligibility and the costs of the loan. Another reason it pays to consider as many specialist lenders as possible.
Assets used to secure the loan. The total value of the assets you use to secure the loan may have a positive or negative impact on interest rates and borrowing costs. If the collateral you provide far exceeds the value of the loan, you may benefit from more competitive rates of interest.
Timely repayment. If you repay your bridging loan on time, you’ll avoid penalty fees and levies that could significantly increase the overall costs of the transaction.
Once again, the importance of seeking independent advice at the earliest possible stage cannot be overstated. Commission an independent broker to carry out a full market comparison on your behalf, ensuring you consider as many available options before making your final decision.
Article by iConquer