What Is A Bridge Loan? – A bridge loan is a short-term loan that is used until the borrower secures permanent financing or removes the existing obligation. This financing allows the borrower to meet the current obligations by providing immediate cash flow.
The Bridge loan is also known as interim financing, swing loans, gap financing during the period when financing is required but not available. The corporations, as well as individuals, use bridge loans, and lender, offer these loans for various situations.
Why does a business need a bridge loan?
When a business is waiting for the long-term financing and needs money to cover expenses in the interim. Take a case of a company which is doing a round of equity financing expected to close in a short period of time.
In this case, bridge loan offers working capital to cover the inventory cost, payroll, utilities and day to day expenses until funding goes through.
How is a bridge loan helpful?
It is easy to get a job when you already have a job. Same you can buy a new home when you already have a home as well. You just like to leave your current job to join the new job.
The bridge loan bridges the gap between the sale value of your existing home to finance a new purchase for your new home. A Bridge loan allows homeowners to use 80% of the value of their existing home for sale as down payment.
What Is A Bridge Loan
Easy to finance a new home
It is a short-term loan which can fulfill your financial needs quickly. If you have planned a new home and your old house is sold but the settlement is still pending. You can get the bridge loan to buy the new home and repay the amount you get the payment.
Controls your property purchase
When you opt for the bridge loan you can acquire your desired property at any time you want. You are not bound by the funds, as you want to buy a property and you have applied for a long-term loan. Buy the property using a bridge loan and pay off the bridge loan after your long-term loan is approved.
Save your time
It is designed to generate the funding immediately to buy a new home. Especially as you have sold your existing home, but the settlement is still pending whereas the new home purchase is fully complete.
A bridge loan is a temporary loan that is less than one year. In this loan, you salable asset works as a collateral to secure your loan. The bridge loan is paid as soon as the asset is sold.
No Monthly Installments
You don’t need to pay any EMI for a bridge loan, as the loan is paid once the property has been sold. It is a great loan if you don’t wish to bear the financial burden of making monthly payments.
A bridge loan can be customized to quality for a variety of needs. There are various types of loans for the individual as well as businesses.
How the bridge loan differs from a traditional loan?
Bridge loan has a faster application, approval and funding process as compared to the traditional loan. A bridge loan is a relatively short-term loan with a higher rate of interest and large orientation fee.
Generally, the bridge loan is accepted by the terms due to short, quick requirements and convenient access to funds. They are willing to pay higher interest rates as they know the loan is short-term and plan to pay it off with lower interest rates, by getting long-term financing quickly. One of the best things about a bridge loan is it does not have prepayment penalties.
What Is A Bridge Loan