Differences between open and closed bridging loans
Bridging loans are a fast way to find money whilst you are selling your house and purchasing a new one. As Bridging Funding offers both open and a closed bridging loans, borrowers need to know the difference before availing either. It is essential to understand what impact your decision can have.
Closed bridging loans
A closed loan carries lower interest rates and is easily accepted by lenders because it gives better confidence and certainty in repayment. However, penalties can be serious if you fail to meet its terms which you have agreed as a part of this loan category. In this type, the lender knows exactly how and when you will pay the loan back. To obtain this bridging loan, you need to show how you are going to pay the loan and state a fixed date when the payment will be made.
Open bridging loans
Borrowers who are sure when their finance will be available in the future can avail open bridging loans. This is suitable for those who have no exit strategy, although the loan has to be paid when it is due. It has higher rates of interest as compared to a closed bridging loan. Lenders consider open bridging riskier, and they get 6 to 12 months to pay back the fund depending on the scheme . Failing to meet the terms will lead borrowers to penalties.