What is a bridge loan: A bridge loan is also known as ‘gap financing’ because, as the name suggests, it is more about filling or channeling the empty cracks in your financial condition, especially when dealing with an emergency monetary need or crisis you are facing. , be it in terms of the purchase of movable property or be it in respect of commercial matters. This loan has become very popular among the mob of real estate owners or entrepreneurs despite the high interest rates that come as baggage. When you are in great need of monetary support and that too within a restriction of some weeks before making down payment or any other needs, then a loan is the only option because this loan can be available in a comparatively shorter period of time. with a minimum number of documents submitted for verification and review before the loan is granted. It is a short-term provisional loan, since it only lasts up to one year.
Real life examples where loans can help: Let’s take a hypothetical case in which you are looking for a new apartment or a two-story house, depending on your needs, requirements and inescapable requirement. The difficulty is that you need to sell your current home to buy a new one and your broker has given up and you just can’t find the right buyer. Here in this situation where you are facing a time constraint for prepayment and urgently need that amount, bridging loan becomes very helpful despite exorbitant interest rates. Unless and until you find a permanent solution to pay off the mortgage, as well as make the payment upfront to get a better deal on the housing complex, the bridge loan or interim financing is the only way you can proceed with the guarantee of proper execution. of your plans with minimal official hassle.
Considering the example above, why is it said that taking a bridging loan is very flexible:
- The terms of the loan state that if you are unable to sell the house within six months, you must pay the loan interest rate repayment.
- If you can find a suitable buyer within six months, then you won’t have to pay back the loan with the interest rates due.
- Bridging the gap created by the time struggle between buying and selling, this loan resolves all your financial issues.
What is the eligibility criteria to apply for the bridge loan: The lender will do a credibility check on your loan history and anything that shows you are not worthy of the loan. You will have to pledge any collateral or real estate asset. Also, bridging loans are often offered by individual lenders and not by any bank.