Perhaps you and your partner are looking to renovate a property that you’ve recently bought at auction? Or maybe, alternatively, you’re looking for a way of affording a new home while you’re still locked into the tedious housing chain as part of the sale of your current home?
Regardless of your reasons, if you’re considering applying for a bridge loan, then continue reading for a concise and informative guide all about bridge loans.
What Exactly is a Bridge Loan?
Often alternatively referred to as “bridge financing”, bridge loans are short-term loans, usually with a contract of between six and twelve months and are so-called because they usually bridge a financial gap for either an individual or a company.
During this short period, the six to twelve months will allow for the securing of longer-term financing or indeed, the release of cash from the sale or acquisition of a company or property. If you’re preparing to apply for a bridge loan, make sure to look for reputable and established private lenders for personal loans who specialize in
The Main Uses for a Bridge Loan
Although there are always exceptions to the rule, in general, the following uses for a bridge loan consist of the following:
- For a company who has plans to expand
- If your housing chain has collapsed but you still want to buy your next property
- When buying land to build a house from the ground up
- If you want to buy a property that has been declared unmortgage-able
- If you’re looking to downsize or upsize your home
- If you’re planning on purchasing a property at auction
What are the Benefits of a Bridge Loan?
It’s no surprise that bridge loans are so popular, both here in the United States and internationally, not least due to the wide range of impressive advantages that such a choice of loan will provide.
Fundamentally, bridge loans will allow the borrower to benefit from higher profit levels from their property, providing the loan is used to finance the right housing transaction and can be arranged and paid out impressively quickly.
Additional advantages to bridge loans include the sheer flexibility provided from a reputable lender and the way in which such loans can prevent serious financial losses, both in a personal and professional context further down the line.
When Not to Take Out a Bridge Loan
Even though, as previously discussed, there are a wide range of usages for a bridge loan, there are two stand-out situations where such a loan and repayment plan aren’t advised.
Firstly, if you’re currently in a seriously poor position in terms of your finances or even on the brink of being declared bankrupt, then additional debt is never going to be recommended and may even prevent your loan application from being accepted in the first place.
Secondly, you should only ever apply for a bridge loan if you have a clear and unwavering purpose for what you intend to use the money for and you should never apply for a bridge loan when you’re clueless about how much core capital you’re likely to need.