Emergency Short Term Loans

The world of finance tends to be a slow one. Lenders take their sweet time figuring out if you are a good lending risk. This can be a problem when you need the money immediately, which is how bridge loans came into existence.

The world of finance is littered with terminology no normal human can understand. Bridge loans are the exception. A bridge loan is exactly what the name suggests. If it a form of temporary financing that essentially buys you time till further financing kicks in.

The basics of a bridge loan are simple. Assume your list your home for sale and shop for a new one. You agree to buy a property with escrow closing February 1st. You sell your home with escrow closing on February 8th.

I have a problem because I have a lag period of seven days between the date I have to pay for my new home and the date I get my money from the old home. A bridge loan can fill this gap and let me complete both deals without worrying about the gap.

Bridge loans are used more often in commercial real estate. They are often called opportunity loans. A business may see a unique opportunity to buy a property, but cannot wait for traditional financing.

Traditional mortgages are cash machines because people will pay interest for 30 years without batting an eye. Bridge loans are profitable, but not in this way since there simply is not enough time to pull in enough on interest to justify the risk.

To make money on these loans, the lending party is going to hit you two ways. The first is to raise the interest rate into the teens. The second is to charge points up front. These points can range from two on up depending on what you need.

The costs associated with a bridge loan are the obvious disadvantage, but they have their purpose. Processing is done very quickly and with little documentation. When you need immediate financing, these loans are just about your only option.

Although bridge loans are considered pretty aggressive, there is one area where they are conservative. Loan to value refers to the percent of the total value of the asset that the lender will lend against. With bridge loans, that figure rarely goes above 65 percent.

Is a bridge loan good for every situation? No, of course not. That being said, it can be a real savior when you need to buy time and a traditional bank just will not touch you.

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