Basically the bridge loan is the interim financing strategy based loan and it offers the financing of an individual or a business. This is done so that the next stage of financing until the next stage of the financing is obtained.
Various types of loans
There are different types of loans offered by different creditors and banks and their terms are also different. Among the short term loans offered by the creditors to the borrowers, the most famous and profitable short term loan is the bridge loan. The time period typically offered for this kind of a loan is ranging from about 2 weeks to as long as 3 years. This time period is kept pending so as to make arrangements for the long term financing. Because of certain provisions and applications of this loan, it is also called as the swing loan sometimes. It is known in some applications as a swing loan.
There are several applications of introducing the new financing techniques. Usually the money which is obtained from this extended financing strategy is used for taking out the bridge loan. In this way the bridge loan is paid back and some other capitalization needs and rates are fulfilled. Talking in financial terms, the bridge loans are typically more expensive than other conventional financing loans.
What are bridge loans meant for
Basically these loans are meant for compensation of the additional risk of the loan. Talking about the interest rates of the bridge loans, it is noted down clearly that the bridge loans have a higher interest rate developed. This makes these loans comparatively more expensive than the conventional financing loans. There are several costs and points which are covered over a small period of time and various fees are also included in these loans. There are some other cases when the lenders put specific conditions like the requirement of a lower ratio of loan over value or a cross collateralization.
Commercial uses of bridge loans
There are various uses and applications of the bridge loans both on commercial as well as estate purchasing procedures. This will help in closing the purchase in a short period of time. This kind of loan is also used in preventing the foreclosure of an estate.
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Most WantedFinancial Terms
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- Accounts Payable Turnover Ratio
- Debt Service Coverage Ratio
- Solvency Ratio
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