Covering debt with a bridging loan is rarely recommended. Using a bridging loan requires an understanding of all of the risks involved and enough financial security to ensure that repayments are easily made over a 12 month period. The high interest rates on bridging loans make it very difficult to borrow beyond 12 months without having to repay very large amounts of money.

So when is it appropriate to use a bridging loan?

In most cases, bridging loans are used for investments. One of the most popular uses of a bridging loan is at auction; when an auction item is won, payment is required within 4 weeks or a deposit is lost – bridging loans can ensure that payments are made within the timeframe. Other requirements for bridging loans include property investment and investment on under-valued assets where quick cash can be incredibly advantageous.