All you wanted to know about bridging finance
Every business needs proper financial planning; similarly proper financial planning is required for running a home or for buying a home. For running a business or for buying a property, finances need to be mobilized and sometimes the best financial plans can go wrong. When an urgent need for finance is required and when there are no other options available, bridge loans come into the picture.
Bridging finance or bridging loan is a short term finance option. The term bridging comes from the fact that the loan is used to bridge the gap between credit availability and debt repayment. The loan is usually used to fund property transactions as a stop gap measure due to credit not being available on time. Bridge loans though mainly used for property transaction can sometimes be used for other business transactions too. The rate of interest of a bridge loan would be higher than normal loans.
For example, let’s suppose that a person wishes to sell property and buy a new property and has planned everything in advance. He has a buyer for his property and the buyer has promised to pay money based on a home loan which he has applied for. In the meantime the person has gone ahead and found a property which he feels would be suitable for him. He goes ahead and makes an initial payment and plans to pay the rest when the first property is sold. In the meantime, the buyer’s loan gets delayed and the buyer asks for more time to buy the property. In such a scenario the person can apply for a bridge loan to buy the second property and he can repay the loan when the first property gets sold.
The best part about a bridge loan is that you need not wait for getting the loan approved which takes days anyway, you can get funds immediately. When there is a financial emergency as enunciated above, a bridge loan helps you come out of such a situation unscathed.
The only problem is finding the right lender who provides the best rates for your bridge loan. To find the best lender all you need to do is to go online and check the websites of
providers. Most websites have online tools that will help you calculate the loan amount. These websites are very interactive and can also help you with the repayment schedule too.