Commercial Bridge Loans vs. Hard Money Loans
Published July 26, 2010
Investors and borrowers are looking for ways to stabilize their finances, so they approach commercial loan lenders. One of the things they’re looking into is alternative financing options, such as commercial bridge loans and hard money loans. If you haven’t heard about these two options yet, read this article to increase your knowledge about them. You never know, you might even try these options out, as well.
Commercial Bridge Loans. In the United Kingdom, commercial bridge loans are also known as bridging loans. Some call them caveat loans, while others refer to them as swing loans. From the name itself, you can tell that commercial bridge loans are a type of loan that bridges the gap, or the period of time, when a new loan is not yet available for use. Thus, it is a type of financing for an individual or business until the next stage of financing is obtained. When the money from the new financing becomes available, it will be used to pay back the commercial bridge loans and other expenses incurred.
Commercial bridge loans are used for the following purposes:
Commercial real estate purchases,
Repossessing a real estate property after a foreclosure,
Securing a longer term of financing,
Purchasing cars or anything wherein the said loan is intended to be repaid over several months
The bridge loan option is advantageous because of its immediacy. It provides an immediate flow of capital in an amount that is extremely useful. It typically lasts as short as two weeks to as long as three years or more.
Hard Money Loans. Hard money loans are a type of asset-based loan with higher interest rates. Simply put, the loan is secured by the value of the collateral property. From the name itself, you can see that hard money loans involve borrowers who are in a distressed financial situation. The borrower might have fallen behind in the existing mortgage. It could also be bankruptcy or foreclosure. Hard money loans allow for borrowing despite bad credit scores, if the borrower can’t document his income, or if only a small fraction of real estate is being lended. The lender does not really consider the borrower’s credit scores, as long as the borrower’s property (which serves as the collateral) is enough to cover the balance and the interest rates. The collateral assures the lender that he regains any losses in case the borrower is not able to pay his loan.
Even though the borrower is experiencing these situations, hard money loans are an alternative to bank or traditional mortgage lenders. Because of this, they are much faster to act on compared to what happens at the average bank, meaning a loan can be closed in less than a week. Hard money loans can be used in renovation and constructions.
Both these financing options, commercial bridge loans and hard money loans, are a great help to investors and borrowers. But investors must ensure that they have approached the right commercial loan lenders, or else they’re just putting their investments at stake. The important thing is that every decision on what loan to take should be based on one’s needs and capacity to pay.
Apartment Loan Store is founded on the basic ideas of professional consultation and education. With these, investors can make informed decisions in their chosen market place.