Understanding bridging loans
Recent studies suggest that more people are opting for bridging loans as a means to fund home purchases. Bridging loans offer consumers a quick way to “bridge” the financial gap between the sale of one home to funding the purchase of the next.
A bridging loan should only ever be considered as a last alternative. Rates of interest for bridging loans are usually calculated per month and average around 1.7 to 2.5%. Consumers need to be aware of the repayment differences between a bridging loan and any other type of loans especially when it comes to repayments.
The majority of financial products are sold on the basis of the APR attached to it. An APR is the rate of interest calculated per annum and is the best way to judge the affordability of said financial product.
Consumers opting for a bridging loan, tend to be in a desperate situation. Coupled with a lack of understanding many people only realise the true cost of a bridging loan after the deal has been agreed.
If you are considering this type of finance it would be wise to research the product thoroughly and to be aware of how the interest is calculated before committing.
