Exploring Alternatives to Bridging Loans
Bridging loans are well-known for their speed and flexibility in providing short-term financing, often used to bridge a funding gap between transactions. But they’re not always the most cost-effective or suitable choice—especially if you’re seeking longer repayment terms, lower interest rates, or if you don’t have property to secure against.
Thankfully, there are several strong alternatives available. Whether you’re a homeowner, investor, developer, or business owner, understanding your options can help you make a better-informed and financially sound decision.
When Should You Consider Alternatives to a Bridging Loan?
Bridging loans tend to carry higher interest rates and fees, making them expensive for prolonged use. If you’re planning a long-term investment, seeking flexibility in repayment, or working with a tight budget, a more conventional form of finance might serve you better.
Key reasons to consider alternatives:
Need for longer repayment terms
Desire to avoid high upfront fees
Lack of suitable collateral
Smaller funding requirements
Avoiding disruption to existing mortgage deals
Let’s explore the most relevant alternatives and what they offer.
Top Alternatives to Bridging Loans
1. Second-Charge Mortgages
If you have equity in your property but want to preserve your current mortgage deal, a second-charge mortgage allows you to borrow against your home’s value without refinancing your first mortgage.
Pros:
Keeps your existing mortgage intact
Longer repayment terms than bridging loans
Can be used for various purposes: renovations, second homes, debt consolidation
Best for: Homeowners with equity who want to avoid early repayment penalties on their current mortgage.
2. Remortgaging or Cash-Out Remortgaging
This involves switching your existing mortgage to a new deal with a larger loan amount, effectively releasing cash tied up in your home.
Pros:
Lower interest rates than short-term loans
Can release significant capital
Suitable for long-term financing
Best for: Homeowners planning to borrow larger amounts and can wait a few weeks for completion.
3. Personal Loans
Unsecured personal loans are useful for relatively small, quick funding needs and do not require collateral.
Pros:
Fast approval process
No property required as security
Predictable fixed repayments
Cons:
Limited borrowing amounts (usually up to £30,000)
Higher interest rates for unsecured options
Best for: Individuals needing small, fast funding for non-property-related purposes.
4. Savings or Family Support
Borrowing from family or using your own savings can be the simplest and cheapest option.
Pros:
No interest or fees
No impact on credit score
Immediate access
Cons:
Can strain personal relationships
Risk of depleting personal reserves
Best for: Those with savings or trusted personal financial support systems.
5. Development Finance
Tailored for property developers, this finance covers both the purchase and construction/refurbishment costs.
Pros:
Secured against the future value of the development
Flexible drawdowns based on project milestones
Cons:
Complex application and monitoring
Better suited to experienced developers
Best for: Developers managing large-scale refurbishments or new builds.
6. Commercial Mortgages
These are long-term loans secured against commercial properties, such as offices, shops, or warehouses.
Pros:
Lower interest rates
Predictable monthly payments
Suited for property acquisition or business expansion
Best for: Businesses investing in or refinancing commercial real estate.
7. Refurbishment Loans
Designed specifically for property improvements, refurbishment loans are ideal if you’re upgrading a property prior to resale or letting.
Pros:
Matches the scope and timeline of renovation projects
Can be refinanced into a mortgage post-refurbishment
Best for: Property investors or landlords looking to add value before resale.
8. Peer-to-Peer (P2P) Lending
Online platforms connect borrowers directly with investors, bypassing traditional lenders.
Pros:
Competitive rates
Fast online application process
Flexible terms
Cons:
Strict creditworthiness assessments
Variable interest based on risk
Best for: Borrowers wanting fast funding without traditional bank bureaucracy.
Things to consider when choosing an alternative to bridging loans
Interest rates and APRs: Lower is better, but consider all fees.
Repayment terms: Match to your income and cash flow.
Speed of access: Some loans fund within days; others may take weeks.
Loan flexibility: Can you extend, repay early, or top up?
Security and risk: Understand the collateral requirements and what’s at stake.
Suitability for purpose: Make sure the loan supports your end goal.