What is a bridge loan: A bridging loan is also known as ‘gap financing’ because, as the name suggests, it has more to do with filling or channeling the empty gaps in your financial condition, especially when it comes to an emergency monetary need or a crisis to the facing. in terms of purchasing personal property or in business matters. This loan has become very popular with the multitude of real estate owners or entrepreneurs despite the high interest rates that come as baggage. When you have a terrible need for monetary support and that too within a few weeks restriction before making the down payment or any other need, 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 presentation of documents for verification and review before the loan is granted. It is a short-term interim loan, as it only lasts up to one year.
Real-life examples where loans can help: Let’s take a hypothetical case where you are looking for a new apartment or a two-story house depending on your needs, requirements, and unavoidable requirement. The difficulty is that you need to sell your current home to buy the 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 time constraints for prepayment and urgently need that amount, the bridging loan becomes very useful despite exorbitant interest rates. Unless and until you come up with a permanent solution to pay off the mortgage and make the advance payment for a better deal in the housing complex, the bridge loan or interim financing is the only avenue in which you can act with the guarantee of proper execution. of your plans with a minimum of official problems.
Considering the above example, why it is said that taking a bridging loan is very flexible:
The terms of the loan state that if you are unable to sell the home within six months, you will have to repay the interest rate on the loan.
If you can find a suitable buyer within six months, you will not have to repay the loan with the interest rates owed.
Bridging the gap created by the time struggle between the sale and the purchase, this loan solves all your financial junctures.
What is the eligibility criteria to apply for the bridge loan? The lender will run a credibility check on your loan history and anything that shows you are unworthy of the loan. You will have to pledge any collateral or real estate. Also, bridging loans are usually offered by individual lenders and not by any bank.