3 Reasons To Consider a Bridge Loan
Purchasing or upgrading a home for commercial or personal needs can cost thousands of dollars. While some companies or individuals have enough cash to cover those costs outright, others must borrow the money from a lending institution. Although there are many options available, bridge loans can be an excellent solution for people who require assets quickly and plan to repay the loan in a short period of time.
1. Cover Short-Term Financing Needs
The duration of the loan is typically no longer than a year and can be as short as three months. This is ideal for people who need a loan to cover short-term needs, such as a down payment on a new property or to take advantage of a business opportunity. These loans can cover financial needs until a new, long-term loan is gotten or the necessary funds are acquired. These loans can help people make the down payment for a new property or begin a remodel project without the delay associated with other types of traditional bank loans.
2. Easy Qualification Process
In order to qualify for a bridge loan, borrowers must provide collateral. Because of this, factors such as the borrower’s credit score and debt to income ratio do not matter as much to lenders. This makes it easier for people without great credit scores to get approved. Oftentimes, people offer up the property that is being sold as collateral for the loan. Once the property is sold, they can use the money from the sale to repay the loan. When offering collateral for this type of loan, it is important for people to remember that the loan granted will likely be for a certain percentage of the value of the property and not the full amount.
3. Quick Closing Time
Because lenders are provided with collateral, they do not have to engage in a lengthy approval process involving the evaluation of the creditworthiness of the borrower. This allows the lenders to approve the loans more quickly, often within a few days. Depending on the lender, funds can be available for use in as little as a week. The fast approval process can allow borrowers to take advantage of immediate opportunities that might otherwise be missed.
There are many benefits associated with bridge loans. However, the interest rates can be higher when compared to other types of loans, so it is a good idea to find a lender with good rates before making a selection.
