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Sunday, August 30, 2009

Bridging Loans - Fills Cash Gaps In Property Deals

Many people thought of buying a new property planned things in a proper manner but a sudden cash gap spoils the whole plan. To solve this problem Bridging Loans are available in the market. These loans are availed to the borrowers to fill up the gaps during the sale and purchase transactions of property. These gaps arise due to delayed sale of older property or due to delayed receipt of earlier payment of the property.

These loans are short term loans availed for a time span of 12 months. The older properties of the borrowers are used as collateral. This facility is availed in two forms:

- Open end bridging loans available to those who have not yet accomplished the transaction of their previous property but want to buy new one. So they need money for this purchase. When the older property is sold the loan is paid off.

- Closed end bridging loans for those people who have already sold off their older property but there is only a delay in the receipt of the payment.

These loans are available at high rates as these are short term loans involving large amount. This is also called as an interest-only loan because the borrower has to pay only the interest every month. The principal amount can be paid after the property payment is received. The amount can be paid as a lump before the repayment period of the scheme ends.

Bridging loans are also availed to those borrowers who have arrears or defaults which cause a bad credit history. As these loans are secured loans so bad credit borrowers can also avail them at low rates of interest. In these loans there is no need to leave property deals that have been looked forward to.


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