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Bridging loans are a form of fast, flexible short-term lending, usually for 12 months or less, which can be used by individuals or businesses. The loan can be used to ‘bridge’ the gap in your finances until either a long-term financing solution can be put in place or alternative funds are received from another source, for example the sale of a property.
Bridging loans, which are sometimes referred to as swing loans or gap finance, are fast to arrange and allow the flexibility to enable you to take advantage of an opportunity that has arisen or obtain a quick cash injection if that’s required.
Bridging loans are most commonly used by property developers, landlords and investors with the intention to secure a property whilst waiting for an existing one to be sold.
They are extremely effective as short term, temporary funding. It should ideally be used to ‘bridge’ the gap between needing money for a purchase (usually of a property) and the main source of funds becoming available.
If you are considering a bridging loan, you really need to consider what your exit strategy is before committing. An ideal exit strategy from a bridging loan could be a mainstream mortgage, a buy-to-let mortgage and of course, there is the option of simply selling the property.