Get assistance before the "real assistance"

Many Britons have been availing the services of bridging loans to meet their requirements before their long-term financing needs are taken care of by a lender.

For those of you who are new to the world of bridging loans, let us understand their meaning and know some quick facts about them. A bridge loan, also referred to as a 'swing loan' is a short-term loan, under which financial assistance in the form of a loan is offered by a lender to a borrower for a period of 2 weeks to 3 years. This loan is granted pending the arrangement of a long-time financial assistance.

As soon as the long-term financing needs are satisfied, the bridging loan is repaid along with other capitalisation needs. These loans are slightly more expensive than the conventional methods of financing as to compensate for the loan's additional risks. Under these loans, the lenders may request for a lower loan-to-value ratio. This ratio, usually, do not tend to exceed above 65% and 80% for commercial and residential properties, respectively and are based on the appraised values of concerned properties. The interest rates, generally, of bridging loans tend to vary anywhere between 12 to 15 percent. However, these percentages may vary from one lender to another or on the criteria of eligibility and repayment capacity or the security pledged.

These bridging loans are usually offered by businesses, individuals and investment pools to earn a high interest and not by most banks and financial institutions as the lack of complete documentation, speculative nature, associated risks and other material factors are not much satisfying in their nature. Banks and financial institutions, generally, find difficulty in justifying the grant of such loans to the government regulators and investors.