It’s no secret these days that Americans are struggling with the credit ratings. Many are rebuilding after a devastating few years, courtesy of the recession and others are recovering from job losses and foreclosures. Either way, you might can benefit from a bridge loan.
They’re flexible, come with fewer restrictions and frankly, they’re easily defined by the kind of rules that work for you – no matter where you are in your financial considerations. It may be the more traditional loans are your best option, but you should at least understand the benefits of these bridge loans and the reasons why they’re a better choice for many. In fact, we’re beginning to hear more about these loan products as they’re quickly becoming the opportunity of choice for millions of home buyers and business owners.
To put it simply, bridge loans are short term financing options – usually two to three years – and they’re used to “bridge” a borrower over any number of complications or situations until longer term financing can be found and secured. They have fewer restrictions and are available with much easier terms. They benefit investors because they’re earning money from the interest rates (which are often lower than traditional loan products).
Interestingly enough, your credit rating is not the top consideration by those looking into extending to you a bridge loan. The banks always turn to that first – but not so with these types of loans. It’s more about your proposed use of the funds. If it looks like a good project or deal, you might find approval comes a lot easier than from your banker – even with poor credit.
You may not be hit with heavy fees for early payment of the loan. Of course, there are usually stipulations associated with early repayment, including telling a lender that you intend to do so (you’re not required to do so, even if you tell a lender that you hope to). Your only problem might come with an early repayment that your lender wasn’t expecting. Even then, those fees for repaying a loan early are much easier to handle than a traditional loan’s contracted numbers.
This is actually an impressive aspect of bridge loans. Traditional bank loans can take weeks to complete and they usually require lot of nonsense. Questions about everything under the sun – what your momma would’ve named you if you had been born a different sex, how many times a day you blink your eyes – and the list goes on. Of course, no banker’s going to ask those types of ridiculous questions, but you still may get hit with what seems like a lot of unnecessary hot air. Seriously – there was one would-be bank customer who was asked why he didn’t finish college. And he was simply trying to open a checking account.
With a bridge loan, you get your answers sooner and there’s less nonsense you have to work out before getting that approval. Instead of waiting weeks, odds are, you’re only going to be waiting few days. In some instances, it’s been reported a twenty four hour turn around is all that was needed in some instances.
With those traditional bank loans, you know the interest you’re paying is part of your monthly payment. Not so with a bridge loan; in fact, you can roll those interest payments over and make one payment nothing but interest. This is actually a better choice for many who opt for a bridge loan to purchase a new house while waiting to sell their current home. It can also be useful to investors who will be using a more permanent type of financing in the future.
Babysitting, stipulations, restrictions – whatever you want to call it, bridge loans often come with fewer of them. This is a great option for those who were denied a traditional bank loan simply because of what they intended to use the money for. With bridge loans, you’re simply not going to be forced into revealing so much information that is uncomfortable. That’s not to say you don’t need a justification, it’s just that those who offer bridge loans aren’t going to be so restrictive or judgmental.
If you haven’t considered a bridge loan as part of your financing package, it’s tough to resist the flexibility this type of loan offers. For many, it’s all the need to hear to make the transition from a bank loan to this type of financing. The faster approvals, less judgment or restrictions and easier repayment options are all fine reasons anyone would want to make that leap.
So have you used a bridge loan in the past? Have you ever considered it? Let us know your thoughts – especially if you’ve incorporated a bridge loan into your financial tool box. We’d like to hear how the experience was for you.
- FTC Warns of Prepaid Card Scams – May 23, 2013