Loan Term for Bridging Loans
The loan term of a bridging loan determines the length of time that you have to make the loan repayments.
The duration for which the bridging loan is provided, typically ranges from a few weeks to a few years, however this is usually determined by the need of the borrower, more so than the lender. It's important to understand the duration of the loan when deciding which bridging loan is the most suitable for your current financial needs.
What is Loan Term?
The loan term is the amount of time that you have to repay the loan and the interest accruing on it.
It can range from weeks up to a number of years to pay off the bridging loan in full. It is typically determined based on the borrower’s current need and capacity to repay the loan as well as the lender’s willingness to provide the loan. Generally, longer loan terms come with higher approval rates and lower interest rates.
How Does Loan Term Affect Bridging Loans?
When applying for a bridging loan, it is important to consider the loan term. The loan term is not just an indicative of the length of time that you have to make the loan repayments but also the rate of interest charged for the loan.
The shorter loan terms are characteristic of bridging loans, which will typically have higher interest rates and therefore higher costs associated with them. On the other hand, with a bridging loan, you will be able to finance a property or project within a shorter time frame than a traditional mortgage.
Some bridging loans may also be available for up to 24 months, which will provide you with more flexibility when it comes to repaying the loan.
Additionally, the loan term can also affect the amount of capital you can borrow, with some lenders offering higher capital amounts to those who are able to commit to a longer loan term.
Final thoughts
The loan term of a bridging loan is a key factor to consider when deciding which loan is the most suitable for you.
Understanding the length of time that you have to repay the loan and the rate of interest associated with it is essential in making sure that you are able to repay the loan when the loan term ends.
Additionally, the loan term will also affect the amount of capital you can borrow. A longer loan term will usually provide access to a lower loan amount because of the increased interest accrued affecting the net loan value.
Therefore, it is important to assess your current financial situation and consider the loan options available to you, before making a final decision.
