Bridge loans are financial facilities that enable a person or an institution to get permanent financing. It allows borrowers to meet immediate financial obligations by availing rapid cash flow as they pursue other credit options. Also known as swing loans or gap financing, bridge loans fill the gap when finances are required but not available. Private bridge lenders may offer customized products for various situations.
Advantages of Bridge Loans
Bridge loans have many advantages, which includes:
- A bridge loan can enable you to acquire the property you need at any time regardless of cash deficit. If you know that the property you intend to buy is in great demand, a viable option is to secure a bridge loan acquire it.
- If you are selling your property, but a buyer is not forthcoming and in dire need of cash, a bridge loan is a viable option. Typically, it will take several months to sell your existing property. In such instances, you can secure a bridge loan so that you can meet your financial needs before the sale.
- When you secure a bridge loan, private bridge lenders may not necessarily demand that you pay the loan in monthly installments. In most cases, they will expect repayment once the property has been sold. Thus, you do not need to worry much about the financial burden of making monthly installments.
Disadvantages of Bridge Loans
Some disadvantages of bridge loan include:
- Bridge loans charge higher interest rates than conventional loans on account of the risks involved.
- If you cannot dispose of your property fast enough, you may have to reduce the price to meet your financial obligation of clearing the bridge loan.
If you seek a bridge loan, ensure you secure the loan from a lender in the business for a long time and has positive reviews and testimonials from existing and previous customers.