In today’s blog, we’ll delve into the world of short-term loans, and bridging loans in particular, giving you an idea of why you might use this highly flexible and extremely useful form of short-term loan.
Let’s start with a definition of short-term loans.
What are short term loans?
A short-term loan can be structured in many ways, for example secured or unsecured, personal or business, but is always debt finance taken over a short period of time – generally between 3 and 12 months. They’re usually used as a means of providing flexibility, or reassurance, to parties of a (property or business) transaction, or a person with an unexpected cost, or other emergency.
When it comes to short term loans, as with most debt there tends to be a fixed repayment period attached to the agreement, and more often than not, they can be repaid in full sooner than the agreed date without early repayment charges.
Flexibility works on the way out, too!
To the bridge
Ok, we’ll be honest, there are more types than we can do justice to here, and we’re a bridging lender, so please permit us to focus on these!
A bridging loan, as the name suggests, is a secured loan which bridges the kinds of gap, or delay, which can appear when dealing with properties, such as:
- You’ve found the house you want but haven’t sold yours yet.
- You’re buying at auction; but the mortgage isn’t ready yet.
- There’s a chain to break.
- A renovation project – large or small – with a deadline or other time element.
- The property is un-mortgageable, or uninhabitable.
So, this type of short-term loan can enable you secure a new home not having sold your old one; or take advantage of a fast-moving investment opportunity.
Businesses can also enjoy the benefits of bridging loans for property development purposes, again when there is a time critical factor like an auction, or to deal with delays on one project before moving onto another.
Bridging loans for businesses.
Short term loans are available for business owners for a range of other reasons.
From expansion, acquisition, inventory purchases and a host of other operational reasons, there are several ways in which this form of short-term loan is a useful financial tool in the business owner’s toolkit.
Bridging loans are generally much quicker and easier to arrange than commercial mortgages and are separate and distinct from them.
At Greenfield, our loans come with a bullet redemption, so there are no monthly repayments which can be an enormous help when it comes to cash flow.
Not to be confused with…
In some quarters, short term loans have a bad name, none of them related to bridging finance in any way.
Credit cards and overdrafts can be used as short-term sources of finance and can often be taken out quickly with minimal paperwork. They’re also generally unsecured, meaning they aren’t secured against the value of your home, which can be attractive because you won’t have property taken away from you if you can’t repay.
However, many short-term borrowers in these products don’t end up repaying the balance with the 0% interest period, leaving them chipping away at the interest over long periods, and barely touching the principal. Paying off the interest rather than the actual debt you’ve accrued is financially very destructive.
Short term cash loans, also known as payday loans, are also available and used to be widespread in the UK. However, due to the often-unscrupulous way some lenders operated, as well as exorbitant levels of interest, such loans are still extremely risky and never used for the same purposes as bridging.
Get a bridging loan with Greenfield Mortgages.
At Greenfield Mortgages, our experts have years of experience when it comes to bridging loans for customers in the UK. With lending available throughout England and Wales, we offer loans from £26,000 to £5,000,000 on terms up to 12 months and up to 70% loan to value, and 100% with additional security.
Turnarounds on receiving equity for your bridging loan can be within 7 days, and there are no minimum income requirements to borrow. There are also no monthly payments because the loan is repaid with a bullet at redemption, and all cases are competitively priced based on the merits of the borrower.
With both FCA regulated and unregulated short-term sources of finance available, contact our experts to see how we can help you bridge the gap between your current and new property with a bridging loan built around your requirements.
Fill in an enquiry form and we’ll get back to you within 24 hours regarding your short-term loan requirements.
Alternatively, you can call our freephone number on 0800 779 7079 or speak to one of our relationship managers directly at our Birmingham office on 0121 233 1188.