Regulated vs Unregulated Bridging Loans

Many people don’t take the type of loan they’ll require into account, including whether a loan is regulated or unregulated.

SINCE 2004

A bridging loan can provide you with a short-term solution to financing a new property or business venture. There are many types of loans available, including residential bridging loans, commercial bridging loans and agricultural loans.

Many people don’t take the type of loan they’ll require into account, including whether a loan is regulated or unregulated.

To help you understand the difference between regulated and unregulated bridging loans, we’re going to discuss the advantages of each one so you can make the right decision for your needs.

What is a Regulated Bridging Loan?

A regulated bridging loan is for personal purposes only. What we mean by this is that you can secure a regulated bridge loan if you’re intending on using the cash for residential purposes. For example, you could buy a property at auction with the intention to live in it, and your bridge loan would be classed as regulated.

There are two other reasons you might need regulated bridging loans, including maintaining a property chain and refurbishing your home.

Property Chain

Selling your current property and purchasing another one is a challenging process. In many cases, you might love a home but miss out on buying it because your existing property hasn’t received any viable offers.

Taking out a regulated bridging loan means you can secure the property of your dreams while waiting for yours to sell. Bridging finance can help you maintain the property chain, which means you can relax in the knowledge that when your house does sell, you’ll be able to use the profits to pay off your bridge loan.

a Property

In very rare cases, you might need some money to refurbish a property you plan to live in. Many lenders will want to review your circumstances before awarding any money, and it’s essential to have a secure exit strategy in place.

What is an Unregulated Bridging Loan?

If you’re purchasing a property or land for business opportunities, it will be immediately classed as an unsecured bridging loan. The primary reason is that the FCA (Financial Conduct Authority) doesn’t regulate business bridging loans.
Businesses are expected to understand the financial implications of their decision, so the FCA takes a less active interest in regulated business financing solutions.

While businesses may not need the same protection as homeowners, you should still take time to consider the agreement you’re entering into.

There are many reasons why you might need an unregulated bridging loan.

Buying Properties at Auction

Buying a property at auction is a popular option for developers because they can find incredible deals for a low price. To secure an investment property, buyers need to have ready cash, and a bridge loan does precisely that.

Property Development

When it comes to investment opportunities, property development is one of the leading ways someone diversifies their financial portfolio. For example, bridging lenders can agree to provide you with the cash to buy a property and then take their repayments after developing and selling it.

Securing a New Business Opportunity

If you find a new business opportunity that you want to take advantage of, it’s common to look at personal loans. But the biggest issue with this type of financing is how it can generate high interest levels, and there’s usually no option of rolling your interest into one lump sum when you pay back the money.

A business loan can provide short term financing solutions, so you’ll be able to invest in a commercial opportunity and have added security.

Take On a Buy to Let Mortgage

A buy to let mortgage is a great solution for landlords, and there are many different types of property available. A borrower might want to perform renovations to ensure they receive the best rental income in many cases.

Most choose to use a bridging loan to purchase or renovate a buy to let property, then use a long-term financing solution to pay the bridge loan off.

Which Bridging Loan Will You Need?


When choosing the right bridging loan for your individual needs, you should remember that residential bridging loans are regulated, and commercial loans are unregulated.

Both have specific criteria you must meet, including:

How much of your current property do you live in? Most lenders will specify that you’ll need to live in 40% of a residential property if you want to secure a regulated bridging loan.
Are you buying a second property to rent it out, use it as a business or resell it? Any of these will require an unsecured bridging loan.

What Role Does The Financial Conduct Authority (FCA) Play in Bridging Loans?

The Financial Conduct Authority is an official regulator for financial markets, including some of the most prominent businesses in the UK. They’re responsible for analysing how a company provides loans and checking every aspect of the transaction is within the legal guidelines.

When it comes to protecting consumers from companies, the FCA takes an active approach. If you’re using a loan provider that isn’t authorised and regulated by the Financial Conduct Authority, then you should be wary of why they don’t have that vital backing.

Commercial loans are often unregulated because the FCA takes an active role to protect personal borrowers. Most lenders will expect that anyone taking out a commercial loan understands their responsibilities, so for this reason, unregulated bridging loans are standard.

First Charge and Second Charge Bridging Finance

When it comes to bridge loans, many factors might influence the type of financial security that comes with your cash advance.

Regulated Loans

Loans used for residential purposes are almost always regulated, but it’s essential to know the difference between regulated and unregulated loans.

If this is the first charge on a property, it will be regulated. Most often, this arrangement is known as a regulated mortgage.

However, second charges occur when there is already a charge on a property. You can use the second charge regulated loans if you’re borrowing money for residential purposes – as long as you live in at least 40% of the property.

Unregulated Loans

When it comes to second charge loans, they’re almost always unregulated unless you meet the criteria we listed above.

Any commercial loan or bridge financing for a limited company is classed as unregulated.

Things to Consider

In most cases, you won’t get to choose whether your financing is regulated or unregulated because it depends on whether your bridge loan is for residential or commercial purposes. Still, it would be best if you understood the risks involved with unregulated bridging finance.

No FCA Security

The Financial Conduct Authority steps in to ensure vulnerable people have the proper support and security when working with a lender. But, the main issue for commercial loans is how they’re unregulated.

The critical thing to remember is that all commercial loans are currently unregulated, so it’s no reflection on the provider – just the system they work under.

A Lack of Clarity

While regulated loans are legally required to display accurate interest rates and repayment terms, unregulated providers are not. This can sometimes mean that you could end up paying more than you originally estimated.

However, you should check with your provider before making a decision because many will take steps to resolve this problem. At Loan X, every loan we offer comes with 100% clarity, and you can trust our commercial bridging loans.

Get in Touch With Loan X Today

If you’d like more information about Loan X and the convenient financing solutions we provide, please don’t hesitate to contact our friendly customer service team. They’ll be able to talk you through the various options available and give you an idea of your eligibility.

A better future starts with us. We look forward to hearing from you.