People attempting to avail commercial or residential bridging finance in the UK get confused with the wide range of interest rates on Bridging Loans that are charged using different calculations.
However, they usually don’t understand that there is also a large variety of borrowers available in the market that requires bridging loan for different purposes and have different criteria to fulfil. That is the reason interest rates for bridging loans are unalike for different types of bridging loans.
This is similar to the regular mortgage or loan in which the loan recipient pays only monthly interest rates on bridging loan borrowed. However, people who do not want a quick bridging loan usually do not prefer to choose this method and most likely to opt for any of the two next options.
This is one of the two commonly used method loan seekers select when applying for a bridging loan. In this, the borrower doesn’t make any monthly payment and pays the complete debt at the end of the term in one shot.
In Rolled Up Interest, interest is predetermined and added to the repayment principal amount and the complete sum is paid by the borrower to the lender once the term of the loan is expired. There are no puzzling calculations involved in this method and the interest rate is easily calculated for the complete term and added to the amount.
A lot of dubious loan takers get mystified between Rolled Up Interest and Retained Interest. Both of these interest rates for bridging loan are very similar to each other and yet very different.
Alike Rolled Up Interest, Retained Interest is also paid at the end of the term and there is no monthly payment that needs to be paid to the lender. The condition that makes a difference between the two is that the Retained Interest rates are changed on the sum of principal and interest; which means the borrower pays interest on interest. Surprisingly, this is the most popular method used by loan sharks across the UK.
Out of all three methods, Retained Interest methods remained the most controversial one and had faced some disagreements with the Financial Services Authority (FSA), the former finance regulatory body in the United Kingdom.
Lenders may proffer bridging loans from 6 months to 18 months terms. Being a short-term and riskier loan, interest rates for Bridging Loans are quite high and may vary from 0.35% to 1.5% per month.
Commercial Bridging Loan rates are higher than residential bridging loans. Some Bridging Finance Companies offer commercial and residential bridging loans for the minimum of 6 months to the maximum of 5-year duration and dispense funds immediately within 24 hours of applying.
If you are looking to avail any type of bridging loan in the UK, contact Finanta to get the best interest rates and services.