Are you thinking of applying for a bridging loan but not 100% sure about it? Why not look at this article to discuss what you should do and not do when applying for a bridging loan.
It will give you some useful tips as to what to consider when applying for one and making sure that you are prepared for it.
Although a bridging loan is a simple process, it does come with considerations and fees, looking at your security and exit strategy. These are things that you must have for a bridging loan, along with some other factors to think about.
What You Should Do When Applying For A Bridging Loan
We are going to look at some of the things you should either do or think about when applying for a bridging loan.
- Realistic Consultation and Valuation-
When carrying out the valuation and consultation stage of the process, make sure to be realistic about it all.
This stage of the process is where you need to be 100% honest about anything the lender goes through and asks you.
It can be anything from your financial and credit history to what the money will be used for and how you plan to profit from the project.
Bridging loans will be given on set terms that have been agreed upon and based on the information given during the consultation and valuation, so make sure to be as realistic with the information you provide as possible.
- Realistic Timescale-
Another point to consider when applying for a bridging loan is to make sure you have a realistic timescale for the project and loan.
With a bridging loan, they are short-term, so you will agree with the lender when the loan and additional fees will be paid back by.
Have a thorough think about how long the project will take you that the loan is required and when money will become available to pay the loan back.
The best thing to do is set yourself a realistic timescale, allowing plenty of time to get it done and paid back.
However, this is to be discussed with the lender, but it is something to consider beforehand and whether you could complete the project and pay it back within 12 months.
- Choose The Right Lender-
When you are looking for a lender to apply for a bridging loan, you choose the right one for you.
Each lender may be slightly different, some with better rates than others, so make sure to browse on the market and do some research into which lender is best for a bridging loan.
- Make Sure You Have An Exit Strategy-
A key point you need to have when applying for a bridging loan is to make sure you have an exit strategy. You won’t get anywhere without having this, and it states how you plan to pay the loan back within a short amount of time.
It is essentially your exit plan for the loan, and this gives the lender reassurance that you’re prepared and know exactly how the loan will be paid back.
- Make Sure You Have Security-
Another critical point that you will need when applying for a bridging loan is to ensure you have assets in security that can be used.
All lenders will require some security, and this is usually an asset with equity or value.
Examples of security can be a property, land, or even an expensive car or antiques.
All lenders will accept different security types, but it is needed, so make sure you have some security behind you that can be used when it comes to applying for the loan.
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The Don’ts When Applying
Now we have had a look at some of the things you should do or consider when applying for a bridging loan; we’re now going to take a look at what you shouldn’t do.
- Hide Things During Your Application-
One critical point that you should not do is hide anything from the lender when applying for a bridging loan.
No matter what part of the process you are in, you should always be truthful about anything they ask you and your finances and what the loan will be used for.
By hiding things and not being 100% truthful during the process, they could take further and legal action against you.
The bridging loan and its terms are based on the application, valuation, and consultation, so it’s important to let them know everything and be honest with them.
- Forget To Plan It Out-
Do not forget to plan out the bridging loan, such as how much you require, what it’s being used for, how it will be paid back, and your security needed.
It is essential to make sure you have these points planned out beforehand, as the lender will discuss them with you.
The last thing you want to do is get to the application, realise that you don’t have an exit plan, etc.
Consider all the section above points that you should do when applying for a bridging loan and make sure these are done and planned out beforehand.
- Have Poor Communication With The Lender-
It is essential to have good communication with the lender, so let them know if you come across any problems or anything that might delay the loan being paid back.
Most of the time, a bridging loan is used for a project, and sometimes things can happen that might cause a problem or delay the project.
So, make sure to have good communication with the lender and mention if there have been any problems previously with anything.
These are a few points to think about when applying for a bridging loan; the best thing to do is make sure you’ve planned and prepared and be as honest as possible through the whole process.
Property Finance Partners are experts in property finance and bridging loans. We have years of experience in supporting property developers, investors and individuals looking for property finance to buy a home.
For more information contact us on 020 3393 9277 or email us [email protected].