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The variations and parallels of bridging loans and development finance Due to the credit crunch most lenders have tightened their loan underwriting which made it more difficult for people to obtain loans. This has specifically affected people wanting to obtain mortgages in that a good credit history is again fundamental and bigger deposits are required. The tight lending limitations which are affecting many lenders have resulted in people failing to obtain the finance that they need. Some people have looked at other available choices for raising finance instead of putting an end to their plans. On many occasions bridging loans have been an alternative option, even though it has to be stated not necessarily a wise option. It's very important that you understand that bridging loans are only intended as a short term loan facility and therefore needs to be repaid in 6 to 12 months. Bridging loans can be the least expensive choice for raising finance over a short period of time, however they typically have a high monthly interest charge leading them to be uneconomical if used as a long term loan facility. Additional positive aspects of bridging loans are that they can be arranged promptly as a result of the more adaptable underwriting criteria. It is this advantage that means they are popular as a method of finance once applications through other channels have failed! In addition to being helpful when funds are required fast, bridging lenders will use a large range of property as security. This can include derelict property, land and buildings in need of repair. Because of the flexibility in lending on property in need of work or significant repairs, bridging finance deals are commonly used as an easy way to finance building work. But bear in mind there are other financial alternatives than bridging loans that may be used for building work. With many similarities development loans are likewise a useful solution for resourcing building, redevelopment and construction works. The important benefits that development finance deals have over bridging is they can be set in place with much longer terms, frequently as much as three years, and the funds can be released in phases when it is required. This has got the principle advantage in that interest isn't actually being charged on money until it has been utilized as the venture begins and expands. The firms who offer development finance are experts concerning building work so can be helpful and can arrange finance facilities that will be genuinely helpful to the project. As for bridging finance, when the development is over the house or property will be sold and the revenues used to pay back the development loan. Alternatively the completed property can be refinanced to pay back the development loan and offered to the renting market.