Bridging Loans
A Bridging loans are essentially loans that is designated as short term – short term in the sense that they are repayable within a period of 2 weeks to 3 years. These loans will typically have a higher interest rate for a two fold reason – foremost, to act as a deterrent for those individuals who might think of taking out a loan without properly thinking out the dynamics involved and secondly to minimize the risk that the lender exposes themselves to in case of a possible default on the part of the borrower – the logic here is that in case of a possible default the lender has possibly recouped most of the principal amount that was lent out to the borrower.
Bridging loans will typically have an interest rate that is about 11 – 15 % higher than the market base lending rate. As stated in the preceding paragraph these loans have a repayment period that stretches from between 28 days to 3 years. Bridging loans are essentially categorized into two groups i.e. Open Bridging Loans and Closed Bridging Loans. Open Bridging Loans are open ended – their use is not limited to the acquisition of property or the development of property; in other words the borrower is not constricted to property issues with the sum of money at hand. Closed Bridging Loans on the other hand essentially restrict the borrower to use of that funding solely on matters property related.
The concept behind taking such a loan was originally intended to help small-scale investors in the real estate market. Such investors would typically see property that was retailing for a song; such a property – that was either being auctioned or was run down and needed some sprucing up before being offset of course needed some serious investment of cash. This is where the idea of a bridging loan essentially comes in. When an individual is in such a context the entity to approach is a bridging loan that essentially forks out the money to be repaid under a stipulated period of time, ordinarily the entire loan is supposed to be settled once the property has been disposed of the market. This is the essence of what bridging loans are all about.
When in the market for a Bridging Loan it is very important that you understand the dynamics involved before you get a loan. The following guideline will suffice if you are looking for a Bridging loan: Foremost, ensure that you shop around for a vendor – bank or mortgage firm – that has the best term when it comes to Bridging Loans.
Secondly, do your math; ensure that you are quiet to the point as far as the value of the property you are investing in is concerned. There are inherent risks involved in both undervaluing a property or over valuing it – remember that the property is used as collateral and that the interest payments are pegged to the value that it attracts.
Thirdly, ensure that you are quiet able to effect the interest payments because your fortunes quiet literally depend on these payments.
There are a myriad of advantages that go with the taking of Bridging Loans. The paperwork that is involved is for instance, not full of procedural bottlenecks as taking of loans is associated with. Secondly, the repayment period is much shorter than an average loan that could go upwards of two decades – the advantage of this is that you are essentially reducing your stress levels. Thirdly, you are basically hedging on an issue – property- that is considered as a shoo in because you have worked on your facts. The only negative that is attached to such a system is the high interest rate but that is understandable with the reasons given for it in the article.
Sharm El-Shiekh, Egypt
Arab Forum Anaesthesia & Pain Management
28/11/2011
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| Arab Forum Anaesthesia & Pain Management3 - 5 June, 2009 Sharm El-Shiekh www.afapm2009.com |
THIS CONFERENCE IS UNDER ACCREDITATION BY AMERICAN |
