Bridging loans are usually for
borrowing over a short period of time. They are usually common among property
buyers who have found new property to purchase but are not able to get rid of
their old property. They then use bridge loans to bridge the gap between the
transaction of buying property and completing the sale.
They usually cater for a
financial need pending financing by an alternative or longer term financing. They
are typically more expensive than the usual loans. This is because they usually
have a higher risk than the usual loans. They have a simple application process
and you receive your cash after a short time.
The amount granted usually
depends on the successful valuation of property. This will normally be up to
65% of the value the property. This amount is usually less any mortgage that
exists. These loans are usually used by individuals, groups or even companies.
Companies usually use bridge loans to cover capital shortfalls that may occur
in case a company had previously borrowed a loan and wants to apply for a new
one.
Companies have the advantage that
they can easily qualify for bridge loans. This is because lenders know that
companies will not have a problem paying high interest rates. Again, these
loans have also been customized to suit the needs of a wide range of companies.
They are also very quick and easy to obtain unlike the usual loans.
Individuals use bridge loans to
finance some emergencies that may occur before their income arrives. These
financial needs could be such as paying taxes and bills. They may also borrow
them so that they can buy new property at an auction or otherwise.
Banks and other lending
institutions have grown reluctant in lending money. This has then led to the
increase in popularity of bridge loans. They are an easy access to quick cash
that you repay later. The disadvantage of this is that they attract a high
interest. One should therefore be sure that they will be able to repay before
applying.
Most borrowers are now seeing
bridge loans as a good alternative to mainstream lending. They are however
temping because it is fast and easy cash. While thinking of applying for these
loans, you should also have an exit strategy. This is because you need to find
a long term financing for your property and you also need to repay the loan.
Whether it’s a company or an individual bridging loans should be viewed as only short term financing solution and not
long term. Other alternatives should be consider to finance your long term
financial needs. They usually attract high fees and interest rates.
Research on lenders so as to settle on one that
caters for your needs. Various lenders will offer various amounts of money at
different terms and conditions. Finding a genuine lender is also important in
order to avoid being a victim of scams.
