Bridging Finance- Its Types, Important Facts about Bridging Finance

admin | June 28, 2018

There are many bridging loan companies available online that helps customers to find the right bridging finance deal. These companies are active these days as the bridging loan market is active.

More and more lenders seek loan services to meet short-term financial requirements of both customers as well as businesses. The bridging lenders, old and new, work hard to find the best bridging loan deals with Loanable for the customers.

What is Bridging Finance?

Bridging finance is the amount of money that a person requires to close a deal. If a person has a certain amount of money to invest in a property but that amount is insufficient and the person is required to add extra amount of money to close the deal then that person can visit the bridging loan providers. If the property item is old and dilapidated then the traditional mortgage lenders abstain from financing to close the deal.

On the contrary, the loan amount provided by the bridging loan providers help to secure the property, simultaneously complete the renovations work associated with the property.

Once the renovations work are completed and the property resale value is enhanced then the buyer or investor can sell the property thereby clearing the bridging loan, subsequently making a profit.

Types of Bridging Loans

In the context of bridging loans the loans are of the following two types:-

Closed Bridge:-In this type a date is pre-fixed when the bridge loan amount needs to be paid back to the loan provider. The period varies. It can be from a few weeks to few months. The borrower usually chooses to pay the loan amount once the property is purchased and renovation work completed.

Open Bridge:-In this type there is no fixed date of repayment of the loan amount. In this context it is important to say that the open bridges are more expensive than the closed bridges because with open bridges there is more flexibility. While borrowing a loan amount it is imperative for the borrower to have a plan to pay back the bridge loan amount and this must be the case irrespective of the type of loan amount the borrower is seeking.

For the borrower who does not have a plan to pay back the bridge loan amount then their home or other assets are put at risk of re-possession.

Facts about Bridging Finance

Following are some of the facts about the bridging finance:-

It is aform of financing for a short term period.
These types of loans are used for doing property transactions.
The interest associated with the loan is normally paid once the loan is cleared.
The loan amount can serve a goodpurpose.
The loan amount is secured on commercial, residential or land.
It is expensive to take the bridge loan as compared to thetraditional finance options.
This type of loan should beused only if theborrower has a clear EXIT route.
These loans can be a good form of financing because it allows the borrower to simplify a property purchase which otherwise may not be possible.

Borrowers must understand that the bridge loans are for a short term period and their interests are quite high. Compared to other traditional form of finances the interests of the bridge loans are very high.

Bridging is considered to be a secured form of lending as the loan remains secured on assets like commercial or residential property or land.

Also Read: – 10 Must-Know Details About Home Loans

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