Secured and Unsecured Bridging Loans

Bridging finance is not your everyday method of borrowing, and it’s natural to have questions about it when you first start considering a loan.

In this article, you’ll learn what types of security bridging loans can be secured against, and the alternatives if you decide bridging finance isn’t for you or you’re more comfortable with other forms of borrowing.

What is a bridging loan usually secured against?

Often, the loan is secured against a property or land being purchased, but this is not always the case, and other properties or assets can be used.

Lenders usually prefer to take out a first charge, but it is possible to obtain bridging finance as a second or even a third charge. Second or third-charge deals will come at higher rates and with a lower loan-to-value (LTV) than first-charge bridging loans.

Residential bridging loans are secured against a property in which the borrower or a close family member lives or will soon live. They are commonly used to buy a new home while still waiting for a sale to complete.

If you’re looking for a 100% bridging loan, you will almost certainly need to have additional assets to put up as security to find a provider willing to lend to you. These could be other properties, but they don’t have to be.

Alternative forms of security

Most bridging loan providers will consider a range of assets as extra security, including:

• Commercial equipment
• Plant machinery
• High values vehicles
• Jewellery
• Watches
• Art
• Boats

This list is not exhaustive. If you need bridging finance and have any items of value you’re willing to put up as security, it’s worth speaking to a broker with expert knowledge of the bridging finance market. For most high-value items, there is a good chance of finding a lender willing to offer you a deal.

Other secured borrowing alternatives

Other secured forms of borrowing also offer alternatives to bridging finance:

• Secured loans: You may prefer the simplicity of a straightforward secured loan, although this will take longer to apply for and is subject to the usual eligibility and affordability criteria. Lenders may apply loan-to-value (LTV) limits. Secured loans are cheaper than bridging finance but interest rates are higher than for mortgages.
• Remortgaging to release equity: Provided you have sufficient equity, you could remortgage to release the required amount. If you are in a fixed-term, you may have to pay an early settlement fee, but this is often the most affordable method of borrowing large amounts.

How a bridging finance broker can help you

Bridging finance is considered high-risk, so mainstream lenders shy away from it. Specialist lenders, on the other hand, are flexible and not restrained by the same rigid lending criteria.

The type of asset you own, your attitude to risk, and the purpose of your loan will help determine the most suitable lender and method of financing for you.

A bridging loan broker with deep knowledge of the industry will assess the strength of your application and exit strategy to help you decide whether a bridging loan is the right option or whether you’re better off pursuing an alternative means of getting the funds you need.

Can you get an unsecured bridging loan?

No. Bridging finance is always secured against at least one asset.

If you have no assets or don’t like the idea of securing your loan, there are unsecured alternatives:

• Personal loan: Personal loans are unsecured and relatively easy to obtain. Typically, the maximum amount you can borrow is around £25,000. You can usually get approved for an unsecured loan even with a poor credit history, although the maximum amount you can borrow will be lower, and the interest rate will be higher. Unsecured borrowing is typically more expensive than its secured equivalent.
• 0% money transfer credit cards: For small amounts, a money transfer credit card allows you to transfer funds to a nominated bank account for a nominal fee. In most cases, no interest is charged for 18 months, so provided you clear the balance within that time, this is a very cheap way to borrow.

Is unsecured borrowing risk-free?

No method of borrowing is completely risk-free. While unsecured borrowing won’t directly put your assets at risk, failure to make repayments will result in additional costs and could harm your credit file.

Adverse credit will make future borrowing harder to obtain and more costly.

Get matched with a bridging finance broker

Bridging finance may not be your first choice, but it could be your best choice – particularly if you need cash fast.

Our broker matching service will handpick a bridging finance specialist with experience helping people in your situation make the right decision.

There is no obligation, and your initial consultation with your expert is completely free. Contact us today by calling 0330 818 7026 or enquiring online.