What are Online Bridging Loans?
Online Bridging loan is a quick monetary help you get in a reasonably short time until your permanent finances or the long term loans are getting approved. For example, you immediately need money to buy a new house. Your current home has not been mortgaged yet and banks need a six-months gap to fund the sum. This is where bridging loans come into play. They provide you with the necessary and fully authorized economic help within a short time frame without the hassle of enormous paperwork. When you receive the bank loan, you can return the debts adding the six months interest to it. Since it bridges the gap between the long-term loans and immediate financial need, it’s known as a bridging loan.
Online Bridging loans fall under two categories:
Regulated Online Bridging Loans
These are the ones where investments are given for accommodation or residential purposes. For example, when the date for securing a new house and selling the one you’re currently living in do not match and you require funds for the new place immediately.
Unregulated Bridging Loans: These are the one where investments are given for a commercial purpose. For example, a company or an individual has bought a suitable land for industrial setup and they want to start the construction right away. Ahead of their loan clearance, they apply for a bridging loan of half the amount to begin the work. Why only half the amount? Because bridging loans have higher interest rates than the normal bank loan so a lesser sum means lower premiums. Moreover, your commercial crisis is also solved.
Other important features of bridging loans :
a) You should be financially sound to get a bridging loan.
b) It is secured by collaterals like property or inventory.
c) Bridging Loans are usually given for a period ranging from 3 to 12 months. But some firms also allow a time frame of as much as 36 months to repay the loan.
d)They provide the additional benefit of paying the monthly interest at the end of the term when you have secured the funds.
e)They have a lesser loan to value ratio(LTV), which determines how much loan you can get.
f) You need to have a sound exit strategy to close the deal. You must either repay installments with long term loans from banks or sell your house or inventory or repay through the money of corporate bonds.
Lastly, it’s advisable to hire an experienced broker for this kind of loan so you can get a favourable deal best suiting your project.