The Simple Truth About Bridge Loans

truth or lieIf you want the finance to fund a new property purchase but your current property is still on the market, then a bridge loan could be the answer you are looking for.

Bridge loans have also been referred to as interim financing and swing loans, and they are becoming increasingly popular around the USA. But does a bridge loan hold the solution to your current problems? Let’s take a look…

Length of a bridge loan

Typically, bridge loans are considered short term loans, and the average length you can borrow money for is around 6 months. In certain cases this can be extended, but if you need financing for a longer term project then a bridge loan is not for you.

Bridge loan interest rates

Because these kind of loans represent a huge risk for the lender, it’s not surprising to find out that the interest rates are above industry norms. With this in mind, before you agree to take out a bridge loan you must understand the interest rate involved so you can factor in the costs.

Bridge loans are risky

The simple truth about bridge loans is that they are risky no matter which way you look at it. For example, if you borrow money against a house you haven’t yet sold and it fails to sell in the next 6 months, then you will have no way to pay back the money. For this reason, you should move forward cautiously and consider all of your options before taking out a bridge loan.

Shop around for bridge loans

Never underestimate the importance of shopping around for bridge loans before deciding on a lender. This could potentially save you thousands of dollars in fees and interest rates, and you might even be able to negotiate a longer time frame in which to pay the money back. Look for bridge loan lenders online, and also search in your local area to build up a sizable list of potential companies who will lend you the money.

Look at other options

There are various other options worth exploring before deciding on a bridge loan. One such option is getting a 2nd mortgage, which is certainly viable for people who have a good credit rating and financial history. You might also want to consider a secured personal loan, selling some of your existing assets, or even cashing in some investments on the stock market to fund the purchase of a new property.