Bridging lender gives insight into the real cost of bridging finance

Bridging lender gives insight into the real cost of bridging finance


With some borrowers finding that headline interest rates are not realistically attainable and with many talking about hidden costs, Bridging and Commercial spoke to Gavin Diamond, Finance Director at Cheval, for clarification on comparing product offerings between lenders.

When brokers are comparing the products of different lenders, it is important to focus on the overall cost of the loan to the borrower rather than just the headline interest rate.


Some lenders advertise headline interest rates that are only possible if prospective borrowers meet a range of strict and narrow parameters.


To get the advertised rate, borrowers have to jump a lot of hurdles and, in reality, only a very small percentage of them end up being eligible.


Undoubtedly, such rates are ‘teasers’ designed to get the phones ringing and enquiries coming in.  


When brokers or consumers contact the lender, they quickly find that the rate they want is not available and their circumstances dictate that only a more typical bridging rate is offered.


Even in those circumstances, where a great interest rate is available to the consumer, the deal can be made much more expensive if the lender adds a range of hidden costs.


As we all know, these can come in a variety of forms - application or arrangement fees, exit fees, early redemption fees, etc. Recently I have seen cases where a lender requires a borrower to provide them with 3 month’s notice of the loan’s redemption. That’s effectively a 3 month early redemption fee.


The result of all this is that the loan’s overall cost could be much greater than another deal offered at a considerably higher interest rate. This is particularly pertinent to loans that are expected to be repaid within a short period of time.


Another thing to watch out for is the quantum of additional fees, penalties or increased rates of interest that may be applied if the loan goes beyond its initial term or does not perform strictly in line with its terms and conditions.


While the cost to the borrower is an important consideration, other factors may be equally significant. Some of the ‘softer’ issues like communication, customer service and ability to get the deal done within the timeframes required are particularly important for time-sensitive transactions.


Different lenders have differing appetites to risk and security properties so brokers are advised to place their borrowers with lenders that are suitable for the circumstances of the borrower.


As an FSA-regulated lender, Cheval embraces the principles of TCF and aims to design products that are transparent and easily understood.

This is conducive to building a sustainable business based on straightforward products and trustworthy service


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