Bridging loans are often a go-to solution for people who need short-term financing. This is especially true for buyers looking to purchase a new property before selling their current one. However, it’s important to note that the high interest rates and hefty fees that come with these loans can make them less appealing for many. If you’re in search of more affordable and practical alternatives, here’s a look at some of the best options available in the UK.
1. Secured Loans
Also known as homeowner loans, these allow you to borrow against the equity in your property—usually at lower interest rates than bridging loans.
Why Choose This?
- Longer repayment terms
- Lower monthly payments
Best For: Homeowners with significant equity who need a lump sum for renovations or investment.
2. Remortgaging
If your property has built-up equity, remortgaging can unlock funds by switching to a new deal or increasing your borrowing.
Why Choose This?
- Lower interest rates than bridging loans
- No additional loan to manage
Best For: Homeowners with solid credit and enough equity to access additional funds.
3. Personal Loans
For smaller financial needs, personal loans offer a fixed borrowing amount with structured repayments.
Why Choose This?
- No need to secure against property
- Straightforward application process
Best For: Borrowers with smaller funding needs and good credit scores.
4. Equity Release
Homeowners aged 55+ can access equity from their property without selling, through a lifetime mortgage or home reversion plan.
Why Choose This?
- Tax-free cash
- No need to move out
Best For: Older homeowners needing extra funds for retirement or large expenses.
5. Development Finance
Designed for property developers, this type of funding covers the cost of land purchases and construction.
Why Choose This?
- Tailored for property developers
- Staged payments aligned with project milestones
Best For: Investors and developers working on refurbishment or construction projects.
6. Business Loans
If you need funding for your business, a business loan can provide a structured way to borrow with competitive interest rates.
Why Choose This?
- No need to secure against personal property
- Flexible repayment terms
Best For: Business owners seeking working capital or expansion funds.
7. Peer-to-Peer (P2P) Lending
Online platforms like Funding Circle and Zopa connect borrowers directly with individual lenders.
Why Choose This?
- Competitive interest rates
- Faster approval process
Best For: Borrowers with clear financial goals who can meet platform requirements.
8. Savings & Investments
If you have accessible savings or liquid investments, using these can prevent the need for high-interest borrowing.
Why Choose This?
- No interest payments or fees
- No credit checks
Best For: Those with sufficient savings looking to avoid unnecessary debt.
9. Joint Venture Partnerships
For property investors, partnering with an investor can provide funding in exchange for shared profits—no loans required.
Why Choose This?
- No personal financial risk
- Shared investment responsibilities
Best For: Property investors looking for alternative funding sources.
10. Credit Union Loans
Non-profit financial cooperatives offer loans at competitive rates, often with more flexible criteria than banks.
Why Choose This?
- Lower interest rates
- Personalised service
Best For: Individuals looking for small loans with a community-focused lender.
11. Retirement Interest-Only (RIO) Mortgages
For homeowners over a certain age, RIO mortgages allow borrowing against property with interest-only payments.
Why Choose This?
- No fixed repayment term
- Lower monthly payments
Best For: Older homeowners looking to release equity without downsizing.
12. Family Loans
Borrowing from family can be a cost-effective alternative, provided clear terms are agreed upon.
Why Choose This?
- Potentially interest-free
- Flexible repayment arrangements
Best For: Those with supportive family members willing to help financially.
13. Overdraft Facilities
An arranged overdraft can help cover short-term cash flow gaps without taking out a full loan.
Why Choose This?
- Instant access to funds
- No additional application needed
Best For: Short-term, small financial needs.
14. Community Development Finance Institutions (CDFIs)
These non-profits offer loans to individuals and small businesses struggling to get bank financing.
Why Choose This?
- Support for underserved communities
- Tailored lending solutions
Best For: Small business owners or individuals with limited access to mainstream credit.
15. Private Credit Providers
Private lenders operate outside traditional banking systems, often offering faster approvals and flexible terms.
Why Choose This?
- Faster decision-making process
- Flexible lending criteria
Best For: Borrowers who don’t meet conventional bank criteria but need tailored financing.
How to Choose the Right Option
Bridging loans might be useful, but their high costs make alternatives worth considering. The best choice depends on:
- The amount needed
- Your credit profile
- Available equity
- How quickly you need funds
Seeking professional financial advice can help you find the best alternative tailored to your circumstances.
FAQs
What are bridging loans mainly used for?
People commonly use them to buy a new property before they’ve sold their current one, or for various property development projects.
Why consider alternatives?
Bridging loans come with high costs and short repayment terms, making them unsuitable for some borrowers.
Are secured loans better than bridging loans?
Secured loans often have lower rates and longer repayment periods, making them more manageable.
Which alternative is best for property developers?
Development finance is a specialised option designed for property investors and builders.
Do these alternatives take longer to process?
Some options, like remortgaging or secured loans, can take a bit more time to process. On the other hand, personal loans and P2P lending can be much quicker and easier to obtain.
Continue Reading
Do you pay solicitors fees when remortgaging?
Right to Buy mortgage with No deposit
Mortgage brokers first-time buyers London
Self-employed mortgages London
How to find best bridging finance lenders
High-rise flat mortgages London
Right to buy: can I buy my council house?
Can You Get a Mortgage on a Flat Without an EWS1 in the UK?
Single brick construction mortgage
How much can I borrow for a mortgage?
Mortgage with a gifted deposit
Joint mortgage with bad credit
Bridging loans with bad credit
Can you add someone to a mortgage?
First-time buyers bridging loans
Do I need buy-to-let landlord insurance?
What is a first charge mortgage? Explained
Do you need a mortgage for Right to Buy?
Bad credit mortgage brokers London
Remortgage for self-employed borrowers