The concept of taking out a loan of financial product and repaying over the course of a number of weeks or month is nothing new. Traditionally, there was little more than mortgages and car insurance that people considered paying on a monthly basis. However, nowadays things are changing with the likes of bridging loans, specific insurance products and even funeral plans able to be taken out over a prolonged period with repayments spaced out over a predetermined period of time to cover otherwise rather high costs.
One of the fundamental reasons for this is because with people having to spend more and more on day to day products and living in general, there is less money available for most to pay for these things in a single lump sum. Additionally, many of these products are designed by their very nature to be repaid in this way. For example, a funeral plan or a bridging loan are not expected to be repaid in one go (although in theory it is possible) as the costs amount to many thousands or even hundreds of thousands of Pounds in the case of bridging loans.
Bridging loans are one of many secured loans available as a short term property finance option for those that need short term funding, secured against a property. they are not designed as replacements to mortgages and their repayments as well as interest rates, whilst comparatively low from what they used to be are higher than those for traditional mortgages.
These work to literally bridge the gap between property purchases, ensuring a property buyer doesn’t lose out on a property due to a potential delay in finds being acquired. For example, a homeowner with a growing family looking for a larger property may find their desired, larger property and a buyer for their current property, worth £500,000. With the new property being worth £700,000, the difference will be covered by remortgaging it once they have moved in.
However, at the last minute the buyer pulls out, leaving not only a break in the property chain, but the seller with the dilemma that they may lose their deposit on the second house if they do not complete the deal in time. This is where a bridging loan comes into play. The homeowner would take out a bridging loan via a lender or broker. This loan will cover the full purchase amount and any additional fees for the new property, whilst a buyer is found for the initial property – this is known as the exit strategy, in which the party in question can literally ‘exit’ the loan.
Then, upon selling their initial property, the homeowner would use the sale amount to pay off the bridging loan with any outstanding fees on top of that paid for by refinancing their new property at a much cheaper rate.
Because bridging loans are likely to entail borrowing hundreds of thousands of Pounds, it is likely to be impossible for the borrower to be able to repay this all in one go (once the property sale amount is repaid.) Therefore, a monthly amount will be agreed with the refinance company who clear the bridging debt, but need repaying themselves and this is done on a much more affordable monthly basis.
The cost of funerals in the UK is rising with the average funeral now costing more than £4,000. This is of course a large amount of money that many people simply cannot afford. On top of that, the grieving family will be dealing with their bereavement and the loss of a loved one, so to be lumbered with such a bill makes things all the more difficult.
Funeral plans however remove the stress of this. the party in question agrees terms with a funeral plans provider or broker and pays their amount over the course of a number of months. For example, the applicant may be 55 years old, they may wish to be buried and they may wish to pay off the funeral plan over the course of a year or a few years.
Agreed with the provider, they simply pay their monthly instalments, covering the amount required for their desired funeral or send off. Once cleared, should the worst happen and they pass away, their family receive the pay-out required to cover the desired funeral or cremation, helping relieve at least a portion of the heartache and stress that comes with losing a loved one.
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