Failure to repay a bridging loan could lead to repossession of the property/valuable asset that was used as security, however this is only ever used as a last resort. In addition to this, borrowers can also face adverse costs as a consequence for not repaying.
Lenders can work with struggling borrowers and rearrange their loan repayments to something more manageable.
As a secured loan, bridging loans will need a valuable asset as security. This means that those with bad credit histories can be considered for this type of finance, however, it also means borrowers run the risk of losing their asset when failing to repay – which can often be their home.
With a bridging loan, as with any type of loan, it’s vital to ensure you are able to pay back the loan to avoid more costs and the potential repossession of your home.
I Can’t Pay Back My Bridging Loan – What Should I Do?
If you can’t pay back your bridging loan on the required repayment date, you should contact your lender as soon as possible.
Unfortunately, issues can arise that make it difficult to keep up with repayments – whether this is from cash flow issues, delays to your building project or something else. If these issues come up, it’s important to be honest with your lender, and let them know right away that you won’t be able to pay the loan on the set repayment date.
Your lender might be able to help you refinance or “re-bridge” under different terms, either with them or with a different lender. The solution worked out between you and your lender when struggling to repay your loan will depend upon the details of the loan agreement and the situation you’re in that’s caused the repayment difficulties.
Will My Property Be Repossessed?
With Octagon Capital, your property will only be repossessed as a last resort. This means that if all other options have been exhausted, your property could be repossessed.
In addition to this, your property could also be repossessed if we can’t get in contact with you for a number of months. When struggling to repay, it’s best not to avoid your lender, as this can often leave them no choice to work with you on an alternative repayment plan, putting your property at greater risk of repossession.
How Do Bridging Loan Repayments Work?
Bridging loans are intended for short-term use, priced monthly rather than annually. Interest on the loan is charged for each month that the loan is open and can be paid monthly or all together at the end of the loan term.
The fees involved for a bridging loan can vary depending on the situation. Below is a list with some of the fees typical for this type of loan:
- Interest rate
- Arrangement fee
- Legal fees
- Broker fees
- Exit fees
- Valuation fees
It’s vital to understand the full cost of any potential loan before taking it out, ensuring that you’re able to keep up with the repayments and thereby avoiding the risk of costly consequences.
Can I Get Out of a Bridging Loan?
You can refinance if struggling to or being unable to pay your bridging loan in London or the UK. However, this does not mean you can avoid repayments of the money the lender is owed. Once you’ve made an agreement with your lender and have borrowed the money, you will have to pay for this loan.
When unable to pay your bridging loan, your lender can work with you to try and come up with a viable solution, making repayments on the loan more manageable.
Are Bridging Loans a Good Idea?
Bridging loans can be a great way of accessing the funds you need when you need them. They can be applied to various different situations, such as buying a new property while waiting for the sale of a current one, property development projects and more.
While bridging loans can be an effective aid for temporary cash flow issues, it’s important to only use them short-term, and be confident in your abilities to repay the loan back as and when required.
