Financing big projects or sudden expenses with traditional loans can be slow. But, there's another option: bridging loans, which offer a quick and flexible way to get money when you need it.

Bridging loans come in two types: regulated and unregulated. Knowing the difference is important for making the right choice for you. In this blog, we'll explore both types, outline what makes them different, and when you might need one.

What is a regulated bridging loan?

Regulated bridging loans are solutions that are secured against a property you live in or one you are planning to live in. This means that if you default on your loan, your home could be repossessed.

This option can help you get money to fund certain expenses, for example, buying a new home or completing renovations. Interest rates are, however, often more expensive than other longer-term options.

The Financial Conduct Authority (FCA) closely monitors and regulates these solutions to ensure fair treatment and responsible lending. The purpose is to protect you from bad advice and make sure that finance companies are doing the right thing for their customers.

If a company offers financial services to the general public, they must register with the FCA and need to follow their rules to stay in business.

In summary, regulated bridging loans are:

  • Regulated by the FCA, so you are protected against bad advice.
  • Secured against a property you live in or will be living in.

What is an unregulated bridging loan?

Unregulated bridging loans are, as the name suggests, solutions that are not regulated by the FCA. This means they do not have the same level of protection.

Whilst they are similar to regulated bridging options in their purpose, they differ in that they will not be secured against a residential property. Instead, a buy to let or commercial property may be used as security. This makes them a popular option with property investors and developers.

Some common uses of these loans include buying a property at auction or completing refurbishments on an investment property.

In summary, unregulated bridging loans are:

  • Often used for business or investment purposes.
  • Not regulated by the FCA, so they do not have a high level of protection.
  • Secured against a property you will not be living in, such as a buy to let or commercial property.

When considering your options, you should carefully assess your specific requirements. Consider your eligibility and get professional advice if you feel you need help applying for a regulated or unregulated bridging loan.

Summary

In summary, there are a number of key differences between regulated and unregulated bridging loans. Understanding these differences may allow you to make an informed decision that best suits your financial needs and circumstances.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.