Bridge Loan Definition

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Bridge Loan Definition


Apartment Listing  

A bridge loan is a loan that is typically taken for a shorter duration than the normal loans that are taken for longer durations.

The term of a bridge loan might vary between 2 weeks to 3 years and it is expected that this loan is a sort of interim financing for the business or the individual till permanent sources of funding are found.A bridge loan is taken with the implicit guarantee that it would be used for near term purposes and usually, the bridge loans are taken to fund working capital requirements. The effectiveness or the efficacy of a bridge loan is that it acts like a “caveat” or a “link” between sources of funding for a company or an individual.

The very nature of the bridge loans make them more expensive than the normal loans and as happens with short term financing the cost of funds is more as compared to the longer term loans. This is because the people who arrange the financing of bridge loans need higher rates to be able to rotate their monies in and out of the borrowers’ accounts. Further, there is higher transaction costs involved with bridge loans because of the higher frequency associated with their turnover.

Typically, bridge loans are used for transactions related to commercial real estate that need quick and easy financing, and bridge loans perform this function very well. It is for this purpose that there are several bridge loan agencies that operate for home buyers and cater to their needs.

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Bridge Loan Definition

 
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Home Loans :

Costs-For-A-Bridge-Loan      Many people take bridge loans for financing their new homes even though the old home is not yet sold. As such, bridge loans are handy for people looking for a transitional financing option. However, it is pertinent for these people to ask themselves whether the cost of a bridge loan is worth it. More..



 
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Bridge Loan Definition