Yes, borrowers can extend their bridging loan term for a few weeks or even months. However, whether this extension will be granted, and by how much, will depend upon the lender and the circumstances in which the borrower finds themselves needing an extension.
Due to the nature of a bridging loan, the borrower’s ability to repay the loan can be contingent on certain factors moving forward in their purchasing process. Some of these can unfortunately become delayed, which can have a chain reaction on other aspects of the project, meaning the borrower may be unable to repay their bridging loan by the date they initially thought they would be able to.
Can You Refinance a Bridging Loan?
Your lender may be willing to let you refinance your bridging loan. Lenders used to be hesitant in offering this option, however now there are lenders willing to offer this to those who need to extend the date for repayment.
There are various different issues that can impact when a borrower is able to repay their bridging loan, including delays to a building project, cash flow issues, or something else entirely. It’s important to be completely honest with your lender if you know you won’t be able to make the repayment by the expected date.
Your lender may be able to help you work out a solution that makes the repayment of the bridging loan more manageable.
How Long Can a Bridging Loan Last For?
The duration of bridging loans can vary, depending on the lender, your borrowing needs and the type of bridging loan you opt for. With Octagon Capital, you should expect to see the following loan durations:
- Regulated companies – 12 months
- Unregulated providers – 24 months
The way your repayments work can also vary depending on a range of different factors. As bridging loans are intended for short-term use, they’re priced monthly rather than annually. Borrowers can either pay the interest monthly or pay for it all along with the rest of the amount owed at the end of the loan term.
Difference Between an Open and Closed Bridging Loan
Put simply, an open bridging loan won’t have a set repayment date, whereas a closed bridging loan will. The way a borrower’s repayments work for a bridging loan will differ depending on whether they opt for an open or closed loan.
Open bridging loans are used by borrowers who are unsure exactly when they’ll be able to repay back the loan. This could be down to a number of different reasons, providing flexibility to the borrower on their repayment of the loan.
While this type of bridging loan offers flexibility to borrowers, they’re known to be more expensive as they’re more of a risk for the lender to agree to.
Closed bridging loans in contrast have a set, concrete repayment date in which the borrower needs to repay their loan back. These types of loans are great for borrowers who know exactly when they’ll have the funds to pay back the bridging loan and are often offered at lower interest rates than open bridging loans. Borrowers are also more likely to accept these types of loans over open bridging loans, however they offer less flexibility in repayments.
What Happens if I Can’t Repay My Bridging Loan?
If you’re unable to repay your bridging loan on the agreed upon date, you could face adverse costs, and as a last resort, repossession of your property/valuable asset. Repossession is typically only done once all other options have been exhausted.
If you’re struggling with your bridging loan and feel like you need an extension it’s important to let your lender know right away, and try to work with them to find a solution that works for both of you.
With Octagon Capital, you can borrow for up to 24 months, with adverse credit histories considered and a minimum borrowing amount of £50,000. Get in touch with our team today to discuss your bridging loan options.
