What Are Bridging Loans And How Do They Work

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.