When to get a Loan
It is never really a good time to borrow money. At the moment, when the interest rates are low, it may seem good, but it is an expensive way to buy something. If there is anything you can possibly do to avoid borrowing money, you should do so. Going without an item might be possible and you should consider this option.
A good thing to do is to calculate how much the item will actually cost if you borrow the money to buy it. Work out the cost of the loan. If you use an overdraft or credit card, these will probably be even more expensive than a loan and you could end up paying for the item many times over. A mortgage tends to be the cheapest way to borrow money and over a twenty five year term you end up paying for the house three times over because the cost of borrowing is so high.
Therefore saving up is far more sensible. Only get a loan if you need money for an emergency such as a new refrigerator or something like that. Or if you could not possibly buy the item without a loan such as a house.
Bridging Loans: The Basics
You are looking to buy a new home. You find the perfect place but the seller wants a quick deal and there is no way you can sell your house in time. How can you get the money in time? Bridge financing could be the answer.
Bridge financing is a high interest short term loan designed to “bridge” gaps like this is your finances. In a home buying situation you will need to provide proof of offers on your current home and for your new home and you should be able to access 80% of the equity of your current property. This is used to buy the new home.
When the sale of your old home is complete you use the money to pay back the bridging loan and interest. Bridge loans can have high rates of interest but can be a useful financial tool.