10 Oct Knowledge Pertaining To Bridging Loans
A bridge loan is a kind of short-term loan, usually known as Bridging Loan in UK, generally taken out for a period of 2 weeks to 3 years pending the arrangement of larger or longer-term financing. It can also be called as Swing Loans. In South African usage, the term bridging finance commonly used, but is used with some restrictions and the laws guiding it are also a bit stricter there. Bridging loans are short-term loans that “bridges the gap” between long-term loans
Bridge loans typically tend to be more expensive compared to conventional financing, because it needs to compensate for the additional risk involved in it. Bridge loans generally come accompanied with a higher interest rate. A Bridge loan is a type of short term financing that gets offered by individuals. It is not offered by banks. However, the interest rates charged by the individuals for giving this kind of loan are normally higher than those offered by banks.
A hard money loan on the other side refers to loans that are provided against a real estate property or as such for security. Hard money loans just like bridge loans are generally provided by private individuals.
The interest rates are higher and the durations are short, therefore on many cases these loans are availed to help financing short term projects that are carried on for many months or just a couple of years. Bridge loan and hard money loan is not the same thing as the readers have now well understood. There is yet another important difference which is the bridge loans are normally slated for commercial investments that may not have yet earn the qualification to be called traditional loans. On the other hand hard money is typically used for distressed situations. Bridge loans can be arranged very quickly and also does not require too much paperwork and documentation.
The bridge loans and hard money loans have got similarities also like they both are considered non-standard loans. They both are availed to meet short-term financial requirements. Bridging Loans can be Open or Close. Open Bridge loan is the one that does not involve any agreed upon payoff date for making payment or may be a payoff is required after a stipulated time period. Closed bridge loan means it is available for a pre-determined time period.
When traditional banks refuse to lend you any money bridge loans can be availed by you. This is one of the greatest advantages or reasons to support bridge loans. A long procedure and heavy paperwork is generally involved in bank loans but bridge loans do not need procedures and documentations so can be availed shortly. If you decide to sell your property but know that it will take several months then bridge loan is the choice available and most suitable. The loan repayment options are flexible. You just need to convince the individuals who will grant you bridge loan and no other rules need to be followed to avail of this type of short-term loan.