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A Flemish City and Bridging Loans

The word bridge comes from old German and in the lowlands there is the beautiful medieval city of Bruges which is the Dutch spelling of a structure that by definition is something that spans an obstacle.


It’s therefore apt that a short term cash loan needed whilst waiting a longer term arrangement should be called a bridging loan.


This kind of loan is typically offered to help people during property transactions where a subsequent sale, let, or more traditional long term mortgage is expected but not immediately available.


Bridging loans are frequently requested by property developers to cover the cost of preparing a property to let. The owner of a run-down city family house may detect an opportunity to convert the building into a number of small apartments.


It may require a sum of let’s say around thirty thousand pounds to do the conversion before the resulting new apartments can be let. If the developer does the arithmetic he can calculate the number of weeks the conversion will take and how many weeks it will take with full occupancy to recover the money.


Alternatively once the conversion is complete the owner may get a more traditional long term mortgage from a bank or building society and be able to pay back the earlier short term loan a little before time.


Because banks have in recent years become much less inclined to lend money the bridging loan has become a popular short term arrangement for many other types of business. There is no restriction for the purpose of the bridging loan and every application is looked at on its own merits.


A self-employed businessman may see a once in a lifetime’s chance to by some bankrupt stock knowing that over a short period he or she will be able to sell it at a very good profit. It’s just about conceivable that he might get money from the bank but that is usually a very slow process and by the time it’s offered the opportunity may have gone.


With this type of loan from Mayfair Bridging the great advantage is the speed of the offer and the delivery of it to your bank.


For bridging loans visit our official website.

A Brief Introduction to Short Term Loans

There are three broad types of loan: Short term, medium term and long-term loans. Each has their own advantages and is suitable for different scenarios. Let’s have a look at some of their uses:

 

  • Long-term loans suit large capital expenditures, such as mortgages and long-term business financing
  • Medium-term loans suit large projects that don’t take very long to complete but which are marginally expensive, such as home refurbishments
  • Short-term loans are suitable as a stopgap between capital and cash, for instance, if you need a loan to cover a car purchase, but you can’t save up for that money for a year or two.

 

These are typical reasons why we use each type of loan, but there are exceptions. For example, you can find short term loans UK for up to a million pounds. Usually, these are bridging loans and they bridge a gap between a long-term loan and a purchase. For instance, if you buy a house at auction, you may have to pay the money within a couple of weeks, but the mortgage company cannot release funds until after the due date of the sale. In this case, a person or business would use a bridging loan to cover the interim term, and then use the mortgage to repay the bridging loan.

 

Below, we’re going to take a closer look at short term loans UK. This is because they can often cause confusion.

 

How Long Do Short Term Loans Last?

‘Short term loan’ is a somewhat broad term. You can find loans that last as little as 24 hours, and as long as two years, but they we consider anything within that range to be a short-term loans. A typical term is around six months.

 

Do You Have to Put Up Collateral?

People often assume that, because they are short-term loans, that you do not have to put up collateral, but this is not the case. Whether you have to secure the loan against a private asset (e.g. your house) depends on two factors:

 

  1. How much you are borrowing. As we stated above, there are very large short-term loans, which can reach millions of pounds. Here, you will have to secure the loan against the property or capital purchase that you are making.
  2. What your credit limit is like. If you are borrowing smaller amounts (usually up to £10,000), the lender will not expect collateral. However, if you have a poor track record in repaying loans, they will want you to put something up against the loan.

 

Interest Rates

Short-term loans attract the highest interest rates, but in the long term, will cost you the least. The lender makes their money from the interest on the loan, and if it is only short term, they don’t have a lot of opportunity to make their money, so they charge a higher interest rate, but you end up repaying less. For instance, you take out a short-term loan of £1000 over a year at 5% APR you would repay £50. If you take out the same loan over ten years at an APR of 1%, you would repay £100. So, while the interest rate is higher on the short-term loan, because of the length of the terms, you repay less than with a long-term loan.

 

If you would like to enquire about short term loans UK, then please visit May Fair Bridging

Loans: What Are Your Options

There are many different types of loan available, and choosing between them can be somewhat complex. Here, we have created a guideline to help you to understand some of the most common types of loan. By having a better understanding of the various types of loan, you can make the correct choices when taking out a loan, choosing loans with the best terms and rates open to you.

 

Personal Loan

A personal loan is intended for use in the short term. This means they usually have terms between two and five years. Now, this might seem like a relatively long time to you, but when you compare it to other types of borrowing, such as mortgage loans, then you can very much appreciate the short-term nature of a personal loan. With the exception of payday loans (which you should steer clear of if you can) and bridging loans, personal loans have the shortest terms

 

Personal loans are also relatively small. The average loan is between £7,500 and £15,000. They also have a relatively reasonable interest rate of around 4.9%.

 

Within the realm of personal loans, we also classify top-up loans. These are loans that you take out on top of the personal loan, but only after you have paid off a relative amount. For instance, if you take out a personal loan for £15,000 and you repay £1500 in a year, you might be able to apply for a top-up loan of £1500 – you can only top the loan up to the maximum amount of personal lending offered by the lender.

 

Mortgage

A mortgage is a type of loan that is secured against a property. When you borrow money from the bank for a mortgage, they let you have it, but your property is put up as collateral. So, if you default on the loan, they can take your house. Mortgages are generally long-term loans. The average term is 25 years.

 

You should always try to get a loan with the best interest rate. The interest rate is determined by several variables:

 

  1. The lender: different lenders offer different interest rates (so shop around)
  2. How much you earn: the more you earn, the more you can borrow
  3. Your credit rating: the better your rating the more you can borrow and the lower the interest rate
  4. The current market: mortgage lenders lend money according to the current market. In good years, you’ll get a better rate than in bad years.

 

Bridging Loan

A bridging loan is similar to a mortgage in that it is used to pay for a property. However, bridging finance is somewhat different because it is borrowed over a very short-term basis. The term is usually between a week and a month. It is called bridging finance because it bridges the gap between the sale of one property and the purchase of another.

 

For instance, if you're waiting for your mortgage to finalise, but you have to pay for the property, you use a bridging gap to ‘bridge’ the gap. You repay the bridging loan once your mortgage is in place. This may sound very risky, but you need to provide the bridging lender with an ‘agreement in principle’ from you bank.

 

If you would like further information about bridging finance, then please visit May Fair Bridging