When it comes to loans and other financing options, individuals and business organizations have plenty of choices such as:

  • personal loans from friends and family members
  • loans from banks and lending institutions
  • returns on investment in various things and
  • bridge loans.
bridge loan

What are bridge loans?

Simply put, a bridge loan is characterized by being a temporary loan that helps an individual bridge a gap between funds and their availability and investment of those funds. For instance, let us say an individual wants to sell property ‘A’ in order to raise funds to buy property ‘B’. For some reason, there is a delay in the selling of property ‘A’ but in order to be able to buy ‘B’, the individual still needs money. This is where a bridge loan can come into play. This individual can take a bridge loan and finish his purchase plans and whenever the sale of ‘A’ goes through, he can repay the bridge loan.

Organizations avail the same

Bridge loans are not just for individual people who want to buy property, organizations of different kinds, all over the world also avail bridge loans. Of course, the difference is in the purpose of the bridge loan. For instance, Rosneft, Russia’s top oil producer was in the recent news because of bridge loans. In another instance, the Italian gaming group GTECH has also been in the news for the same reason.

How does an individual avail a bridge loan?

Since bridge loans are primarily governed by private lenders, it would be easy enough for an individual to look out for a lender who is willing to give him competitive terms and conditions. There are also plenty of online tools that will help in calculating the bridge loan amount. Such calculator will take into account factors such as:

  • purchase price
  • available cash
  • amount of first mortgage
  • the interest rate for the bridge loan and even
  • the first interest rate.

This will give a persona very realistic expectation of the bridge loan amount and make the payment schedule a little easier to manage.

Some terms and conditions

Depending on the lender of choice, one will also need to deal with the fact that a bridge loan primarily is more expensive than conventional loans. Bridge loans have higher interest rates and can also have shorter terms as well. So, an individual will need to make financial plans accordingly.

Most repeat home buyers do opt for bridge loans. Some of the extra considerations that can be kept in mind are:

  • the money that one may have to pay as rent before moving into the next property
  • the time that it is going to take to sell the original property and
  • the fact that in most cases, a person finance only up to 80% of the combined value of both homes.

Thus, there is no denying the fact that the ease with which an individual or an organization can get a bridge loan has made it rather popular loan option. Paying attention to the higher interest rates and other terms and conditions will allow people to calculate for the same in a better manner.

To know more, please visit: http://www.val-chris.com


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