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The differences and similarities of bridging finance and development loans Due to the market meltdown many financial institutions have tightened their finance underwriting which has made it harder for people to obtain finance. This has in particular affected people hoping to obtain mortgages as a good credit history is once more invaluable and bigger deposits are required. The tight lending limits that are affecting most lenders have led to people failing to get the loans that they need. Some people have looked at other options for raising finance rather than stopping their plans. On many occasions bridging loans have been another option, even though it has to be said not always a wise alternative. It is very important to keep in mind that bridging finance options are just intended as a short-term loan facility so needs to be repaid within 6 to 12 months. A bridging loan are frequently the cheapest choice for raising finance over a short time period, but they typically have a high month-to-month interest charge causing them to be uneconomic if used as a long term loan option. The additional advantages of bridging loans are that they may be arranged swiftly as a result of the more flexible underwriting criteria. It is this plus point that makes them commonly used as a method of finance when applications through other channels have failed! As well as being invaluable when cash is required fast, bridging lenders will use a large range of property as security. This includes derelict property, land and buildings in need of renovation. As a result of the flexibleness in lending on property requiring work or major repairs, bridging finance deals are often used as an effective way to pay for building work. On the other hand there are other finance sources than bridging loans that could be taken advantage of for building projects. With many similarities development loans can also be a useful option for resourcing building, renovation and construction work. The key advantages that development finance deals have over bridging is they can be arranged with more lengthy terms, often as much as 3 years, and the funds can be released gradually as it is needed. This has got the primary advantage in that interest isn't actually being incurred on money until it is utilized once the venture begins and grows. The lenders who provide development loans are specialists concerning building projects so can prove to be very helpful and can structure finance facilities that will be genuinely useful to the venture. As for bridging finance, when the development is over the property or house will be sold and the revenues used to settle the development loan. On the other hand the finished property can be refinanced to settle the development funding and made available to the rental marketplace.