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Bridge loans are loans that are generally very short term, easy to acquire and which have quick approval times. Their main advantage is speed. Generally used to quickly close on property, save property from foreclosure or for other items which generally come on short notice and require quick money, bridge loans are extremely convenient and useful when you absolutely cannot wait for a standard loan. Other names for bridge loans include "interim financing," "gap financing" and "swing loans."
As the terms "interim financing" and "gap financing" imply, bridge loans are also typically used to fill in gaps or to finance businesses or business operations in the interim between larger loans, or between business start up and more permanent financing, in addition to being used on short notice for real-estate purposes. They typically range from two weeks to three years, and the amount of the loan and interest rates are only really limited by the customer's credit. However, the amount of the loan generally won't be as high as long-term loans would be, and interest rates generally run two percentage points higher than the average 30-year fixed-rate mortgage, or between 7 and 9%.
It is important to determine whether or not you really need a bridge loan before acquiring one, as they can be rather difficult to manage due to their generally short loan periods and somewhat high interest rates. If you do decide to apply for a bridge loan, you can maximize the value and lower the end costs by using the same bank to handle both your bridge loan and your more permanent financing, such as a mortgage.
As the terms "interim financing" and "gap financing" imply, bridge loans are also typically used to fill in gaps or to finance businesses or business operations in the interim between larger loans, or between business start up and more permanent financing, in addition to being used on short notice for real-estate purposes. They typically range from two weeks to three years, and the amount of the loan and interest rates are only really limited by the customer's credit. However, the amount of the loan generally won't be as high as long-term loans would be, and interest rates generally run two percentage points higher than the average 30-year fixed-rate mortgage, or between 7 and 9%.
It is important to determine whether or not you really need a bridge loan before acquiring one, as they can be rather difficult to manage due to their generally short loan periods and somewhat high interest rates. If you do decide to apply for a bridge loan, you can maximize the value and lower the end costs by using the same bank to handle both your bridge loan and your more permanent financing, such as a mortgage.