This is going to be the first of several articles, the theme of which is claims made when bridging loans go wrong. As soon as the words ‘bridging loans’ are uttered, many wring their hands and beat their chests; they are thinking one thing, hugely risky.
The bridging loan industry has done much in recent years to clean up its act, and it has had to do so in face of a major change in regulation, which happened from 2016 onwards. However, for a relatively niche area of the lending sector, bridging loans, due to their first and second charges taken over property, commercial or residential, have several variants that can go wrong, despite their basic construction.
I have seen several cases where the bridging loan is said to be unregulated, from a regulated lender, and some when an unregulated lender has provided an unregulated loan, thinking that it was not capable of being a regulated loan. As regulated bridging loans carry far greater comforts and safeguards for the borrower, if loans could be regulated, they should be, and unregulated lenders cannot provide them.
There are many other factors to consider, including Unfair Relationships, and default interest rates being ‘penalties’ rather than rates that protect lenders against the cost of defaulted loans that it has on its books.
More on bridging loans to come, but this is a complex area where I have excellent width of knowledge.
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Dorothy Finley
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