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Which Main Factors Influencing Bridging Loan & Finance Interest Rates?

Which Main Factors Influencing Bridging Loan & Finance Interest Rates? 1

Bridging loans are issued subject to interest payments in the same way as a conventional loan. But as the balance is usually repaid within a matter of months, overall borrowing costs can be kept to the bare minimum.

Monthly interest is often charged at a rate of around 0.5% or less, adding up to excellent value for money for short term borrowing.

As with all types of loans and financial products, there are several key factors that can influence bridging loan interest rates. Depending on each of the following, a borrower could be looking at significantly lower or higher monthly interest payments on their loan:

  • Their credit score at the time of their application
  • How much money they need and for what purpose
  • General financial circumstances at the time
  • The length of the loan term and proof of an exit strategy
  • Value of the assets used to secure the loan

The extent of the market comparison performed to find the best possible deal can also make a big difference to the cost-effectiveness of a bridging loan. Working with an established broker therefore comes highly recommended, as many bridging specialists offer their services exclusively via broker introductions.

How Do Bridging Loan & Finance Interest Rates Differ from Conventional Loans?

One of the most appealing aspects of bridging finance is the way in which prompt repayment is typically rewarded, as opposed to being punished.

With a standard loan or mortgage, early repayment usually results in excessive fees, levies and penalty payments. With bridging finance, repaying early can lead to considerable savings. Interest is charged on a monthly basis, which means that the earlier the loan is repaid, the cheaper the facility becomes.

It’s important to carefully consult the terms and conditions attached to a bridging loan, before going ahead with such a product. Repayment policies vary significantly from one lender to the next, and should be discussed in full with your broker before the loan is finalised.

Are Bridging Loan Interest Rates Likely to Go Up or Down in the Future?

Predicting what is to come for a bridging loan rate is always difficult, as there are countless variables and unknown eventualities to factor in. 

But as Bank of England base rates are temporarily being held at an all-time low of just 0.1%, it stands to reason that interest rates will most likely increase going forwards. Base rates cannot realistically get any lower, so logic would suggest that the only way is up.

Now could therefore be the perfect time to apply for a bridging loan, if looking to source short-term funding for a project or purchase of any kind. Bridging finance is likely to remain a more flexible, accessible and cost-effective option than a conventional High Street loan, but today’s record-low interest rates may not be around forever.

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