Disadvantages of Bridging Loan
A bridging loan comes with plenty of advantages in comparison to other funding methods. It is an ideal solution for many short-term borrowers. But bridging finance has certain disadvantages as well which are mentioned below.
Why a Bridge Loan can be Disadvantageous?
- Additional charge – You may come across some brokers who will charge you an extra amount for their services, adding to your cost. At Bridging Funding, we do not charge an additional fee. You will receive expert advice and guidance at free of cost.
- Adds compound interest – If the loan is unpaid for many months, it attracts compound interest and you may have to pay a hefty sum.
- Higher rate of interest – For bridge loans, you may have to provide a greater rate of interest. Hence, it has a higher financial risk.
- Reduction in the sale price of the prevailing property – If your existing property does not sell quickly or does not sell at an expected price, you may have to cut down the cost in order to recompense your bridging finance.
- It is expensive – Bridging loan is always expensive. It comes with different rates, though it completely depends on the lender.
- Not everyone is eligible for this loan – The value of your land has to be significant so that you can ensure that there is an adequate value across both the lands.