Life as a student inherently means occasionally running short on cash. But when you find yourself genuinely struggling to make ends meet with no loan instalment on the horizon, things can quickly go from bad to worse.
This is where a student bridging loan can help – a specialist facility, designed specifically to ‘bridge’ gaps like these. While taking on additional debt in times of financial difficulty may seem unwise, a student bridging loan could be just the thing to tide you over on a short-term basis.
What is a Student Bridging Loan?
Student bridging loans work in the same way as conventional bridging loans, though on a significantly smaller scale. Bridging finance is a specialist type of short-term loan, issued at short notice and due for repayment within a few months.
If you run short on cash but expect to receive some kind of payment in the near future (such as a student loan instalment), a bridging loan can keep you going until it arrives.
How Do Student Bridging Loans Work?
Bridging loans are typically secured against assets of value, such as homes, business properties and personal possessions. However, an upcoming loan instalment (or guaranteed future income of any kind) may also be accepted as security for bridging finance.
For example, you may be expecting a student loan payment of £1,500 in around eight weeks. In the meantime, you have practically nothing left to live off.
A bridging loan could be taken out against this loan payment, typically with a maximum LTV of around 8% (i.e. 85% of £1,500, so £1,275). This money is transferred into your account within a few days, with no restrictions on how it is spent.
Interest then applies on a monthly basis, which could be less than 1% per month. When your student loan instalment arrives, you repay the loan in full, complete with all associated borrowing costs.
Who is Student Bridging Finance For?
Bridging finance is a flexible, accessible and affordable facility, suitable for anyone looking to bridge a temporary financial gap. Lenders are typically willing to work with anyone who has a viable exit strategy for their loan (i.e. when and how the loan will be repaid) and has a reasonable credit history.
For example, if you blow an entire student loan instalment on superfluous purchases and indulgences within the first week, you may find it difficult to plead your case to a lender. But if you have run short on money while managing your finances more sensibly, they are more than likely to hear your case.
Bridging loan applications are assessed by way of individual merit, with flexible terms and conditions to suit all requirements. Just as long as your financial track record is reasonably amicable and you can offer evidence of income due in the near future, you have every chance of qualifying for a student bridging loan.
Is Taking Out a Student Bridging Loan Risky?
Before applying for bridging finance, it is important to acknowledge that it is a strictly short-term facility. Under no circumstances should a bridging loan be taken out with long-term repayment in mind.
During the application process, a repayment date will be agreed between you and your lender. If this agreement is broken, you will find yourself liable for additional fees, penalties, and elevated interest rates.
It is therefore essential to ensure you fully understand the pros and cons of bridging finance and you are 100% confident in your exit strategy. Consult with an experienced broker or service provider before applying, in order to ensure that bridging finance is the right choice for you.
