Peer to peer bridging loans has become a popular and widely trusted funding source in the last few years. Investors find it an excellent option for investment as it allows them to choose risks and rewards according to their financial goals. P2p bridging finance provides you with an opportunity to invest the money as a part of a loan that a lender has agreed to borrow. It can be a perfect option for those who want to invest money for a short time with predictable returns and a viable exit strategy. Peer to peer platforms bring the investors and potential borrowers together and make the process easier than ever.
Here, in this article, we are describing how p2p bridging finance works, its benefits for investors and borrowers and how you can get them as a borrower.
What is P2p Bridging Loan?
Peer to peer platforms have been working in the UK for several years, and now they are popular among individuals, businesses, and property investors. Now investors do not wait for years to earn high-interest rates, and with bank savings accounts and conventional investments offering low-interest rates, investors are looking for alternative investments like p2p lending. It helps investors to earn high returns compared to conventional investments.
P2p bridging loans work differently from traditional bank loans because you are taking funds directly from the investors instead of banks. Banks use deposits of tier customers to find loans. Peer to peer platforms matches investors directly with the borrowers. As an investor, you can select the loans you want to fund and can get expected returns. In addition, if you do not want to fund a loan completely, you can fund it partially. These platforms have a number of borrowers that can contribute a small percentage to different loans.
Uses Of P2p Bridging Loans
Many p2p platforms offer bridging finance to help borrowers secure quick loans and fulfill their needs. Investors pool their investments to offer secured loans through peer to peer lending UK and enjoy the return that was previously only experienced by wealthy investors.
Most borrowers take bridging loans like personal loans and use them for various purposes such as property purchase, property development, refurbishment, tax payment, and debt consolidation. Small businesses also use it to overcome their short-term cash-flow problems. However, before investing or borrowing through this type of funding, it is vital to understand the implications and take advice from finance experts.
The benefits of Peer to Peer Bridging Loans
Bridging loans offer benefits to both investors and borrowers. Here are some major benefits:
- There is no need to invest a large amount of money upfront.
- These loans are secured against the property of the borrower. It means there are fewer chances of losing money even if a borrower defaults.
- P2p platforms provide you with an opportunity to diversify your portfolio.
- As these are short-term loans, it reduces exposure when the market drops.
Bridging finance offers :
Here are some benefits that a peer to peer bridging finance offer to the borrowers:
- The application process is easy, and it offers less strict lending criteria compared to traditional bank loans. Lenders are concerned about an exit strategy; you will secure a loan easily if you have a strong exit strategy.
- You do not need to wait for weeks or months to get a loan. It has a quick approval process and grants funds usually within days.
- You can get a loan even if you have a bad credit score, but you have to pay a high-interest rate.
- Loans are flexible, and terms are tailored to meet borrowers’ needs.
- P2p platforms offer easy repayment plans. Although bridging loans have high-interest rates compared to long-term loans, repayments options are easy to meet.
Due to increasing popularity, the number of platforms offering bridging finance is also increasing dramatically. So, it is essential to do research, shop around and make price comparisons to find a well-reputed and experienced platform for lending or borrowing money.
Drawbacks Of P2p Bridging Loans
As bridging loans are relatively new, both the investors and lenders have concerns about risks and drawbacks. Therefore, it is essential for you as an investor to ensure that your investment is utilized wisely. Similarly, borrowers want to know that the funding would not suddenly fall through because they are relying on this financing to bring projects forward.
Peer to peer lending platforms has put several measures to ensure that both parties have confidence in their finances. As a borrower, you should always keep in mind that bridging finance has a high-interest rate.
Other than the interest rate, you have to pay several changes such as arrangement fees, exit fees, late repayment fees, and legal fees, which make it an expensive way of borrowing. Always choose a platform that is transparent in terms of rates and fees.
Is It Right To Take a P2p Bridging Loan?
Peer to peer bridging finance offers numerous benefits to both the investors and borrowers. But it also has some disadvantages that you should always keep in mind before making a final decision. It depends on your personal circumstances whether you should take it out or invest in it or not. We suggest you get this type of funding only when you can afford to repay it on time. Otherwise, the interest will continue to accumulate, and you may never come out of this borrowing cycle.
As an investor, you should make your goals like how much money you want to invest, for how long, and your expected returns. Then, invest in p2p bridging loans only when you find that they meet your financial goals.
Peer to peer bridging finance is relatively a new type of p2p loan. It has become popular rapidly due to the flexibility and eases it brings for investors and borrowers. However, like all other financial products, it comes with some risks that you should always keep in mind before making a final decision. You can reduce these risks by taking proper measures and choosing the right platform. If you do not have time to shop around and compare different platforms, you can use online comparison sites. These sites provide you with a quick comparison and save your time and energy.