One of the most under appreciated loans available to customers in need of fast money for bills or expenses is a fast bridging loan. Unlike most loans associated with longer-term payments and commitments, such as mortgages over the span of twenty or thirty years, fast bridging loans are designed to be paid and repaid in a matter of weeks or months, so that neither party is tied up in any contracts that last longer than a year. Bridging loans are often used for commercial or residential purposes when there can be massive returns on an investment in only the span of a few months, such as opening a new branch or improving a house before sale. Due to the fact that a fast bridging loan will be a rapid transaction and fast interest is returned, many banks are willing to give such loans to customers with mediocre credit, even in these tough economic times. Indeed, so rarely are banks or credit agencies consulted for the purposes of a bridging loan that it may be difficult to find specialist, but both parties usually agree to the circumstances of the loan due to the need for alacrity. To secure a short-term bridging loan, consult an accountant to ensure that a bank will not set up a contract that is overly unfavorable to your financial interests.
Bridging loans can drive down the cost of interest on repayment due to their simplicity and the quick rate of profit for credit agencies. Due to the need for rapid transactions, there are fewer fees and taxes associated with bridging loans and usually faster appraisal on property or the borrower’s assets. It can take as little as three days for a bridging loan to be approved. Although nearly every bank will insist on collateral, unless the borrower’s credit history is near flawless, collateral for bridging loans is often the physical real estate property being sold, allowing for a surplus amount on the loan in case repayment is not collected in time.
The most common uses for bridge loans involve purchases of property. A homeowner moving into a new house, for example, can secure a bridge loan to build an expansion onto his house, add a pool, or redecorate the interior. This allows the homeowner to sell his or her house at a considerably higher value and profit from the added sale value, even when subtracting the interest and repayments on the loan. Other occasions for bridge loans may come from a property that has not sold during a slow spell in the housing market (usually during winter) but will garner a prospective buyer soon. A bridge loan allows the previous homeowner to put a down payment or first month’s mortgage on a new house or apartment if the customer does not have access to the money from his own reserves.
Property sold at auction is also a common cause of bridge loans. Real estate seized from foreclosures, legal action, or that has been abandoned draws interest from developers or private parties looking to renovate and refurbish the house(s) and profit from new ownership. Bridge loans cover the gap in time between the seizure of the house and the sale at auction. Although bridge loans can cover expenses of purchasing a new car or other bills, it is rarer for borrowers to commit to rapid repayments on less expensive options than real estate, especially as cars depreciate from the start of purchase while homes do not. Interest rates from bridge loans may be twice as high as standard borrowers, so it is uncommon for low yield purchases to be made from the money borrowed from short-term fast bridging loans.