Important Facts To Know When Applying For Bridging Loans

Nowadays, people are beginning to see the many practical benefits of bridging loans. This type of funding solution is quite different from the traditional bank loan.

So what exactly are bridging loans?

Known as a type of short-term financing solution, they are often used to fund a business or individual that requires money urgently at that moment. Just as it sounds, bridging loans are intended to ‘bridge’ the gap between a debt falling due and money coming in later. Yet, it ensures that the primary source of credit is obtainable.

How does it work?

The primary purpose of offering bridging loans is to support those who are looking to buy land or property before selling off their property. Thus, it serves as a quick fund for those trying to secure a business or residential property.

Typically, a bridging loan can be taken out for a few weeks up to 12 months or more, depending on the licensed moneylender you’re borrowing from. Other criteria that play a part include the exit strategy and the availability of the mainline of credit once the borrower is able to meet the agreed terms.

Unlike other types of longer-term funding solutions, bridging loans often attract higher interest rates. The interest rates are determined on the amount of credit requested and usually require collateral.

It can be offered to secure land or property, as well as serve other purposes. In many instances, bridging loans are provided for:

  • Buying an uninhabited property
  • Prevention of property repossession
  • Quick Purchase of property such as auctioned purchases
  • Property funding and restoration or conversion work
  • Purchase of market under-valued property

Benefits of Bridging Loans

  • Quick Access

Bridging loans come in handy for one thing and that is, they are an excellent way of getting quick access to capital. They are a short-term funding solution with an easy loan approval in Singapore and are designed to be repaid in full as soon as the long-term financing arrives. Application processes are faster when compared to other types of traditional loan funding.

  • Flexible Repayment Options

They are flexible as they provide a far better option when compared to traditional mortgages in that its repayment is designed to suit you. That means that as the borrower, you have some power to control repayment options. They can help you improve credit score in as much as repayments are made as and when due.  They give you some breathing space to decide on whether to sell an existing property or arrange for longer-term finances.

  • High Purchasing Power

They can also offer higher and better purchasing power since it means you are buying a property with cash.  In the absence of high loan-to-value (LTV) mortgages, bridging loans offer the solution to get a property. They can be used to secure almost any type of property like land, apartments, houses, commercial units, and shops. Due to the market’s intense competition, interest rates might occasionally drop quite a bit.

In conclusion, your present or intended needs should determine if you will need funding support through bridging loans or not. Also, ensure you have a clear-cut strategy of how to make full repayment at the end of the term.