How Are Bridging Loans Settled? Paying back a Bridging Loan, what if I cannot pay back the finance outstanding?

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How Are Bridging Loans Settled?

When you take out a bridging loan the lender will ask you for security on the loan this will be in the form of a property or land, they will register a charge against this until the bridging finance is paid back, when the charge will be released, all bridging loans are based on a charge being registered against the asset, unlike a personal loan where no charges are registered.

 

You will also agree on a reasonable exit strategy that is easily achievable, this will be either a sale or refinance of the asset in order to pay back the loan, although sometimes it is from the release of capital from another asset or it could also be  from another means such as probate from a will or any other means that you can demonstrate that funds will be coming from, as long as they are comfortable that the money will be coming in they will agree to a loan.

 

When purchasing property, the collateral is usually the property you are purchasing. If you are then unable to pay the bridging loan back, the lending facility takes ownership of the property to settle the outstanding finance.

 

In a worst-case scenario, house prices may fall, whereby the sale of the property does not cover the amount of the loan. You would still be liable to cover your debt and the lender.

 

Although this scenario is unlikely there is a possibility it could happen to property developers that renovate a house but struggle to sell it.

 

Borrowers that find themselves in an unfortunate situation whereby they still owe a substantial amount on the loan, can also face bankruptcy. However, this solution is very rare and would be declared as a last resort by the courts.

 

Although the penalties for unpaid loans are harsh, cases very rarely end in disappointment. Providing you stay in contact with the lending facility and explain there has been an unexpected delay, you should be able to reach a satisfactory agreement, as you would not want any bad credit left on your credit history.

 

Easy Bridging Loans can arrange your loan with ease and will guide you through both the choice of loan and all of the processes that are associated with taking a bridging loan, because we specialise in this type of finance and nothing else, we will always have the answers to any problems that could be encountered along the way.

 

Get in touch now to discuss your requirement as professionals in this field and know the industry inside out, call us today or complete our online form to get things started.

 
 

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