How do bridge loans work?

Bridge loans are short-term financing solutions designed to help individuals or businesses meet immediate financial needs. Here's how they generally work:

• People or companies commonly use bridge loans to buy a new property before selling an old one.
• The loan amount depends on the value of collateral, like a property you pledge. You typically can borrow a percentage of its value.
• Bridge loans are meant to be paid back within months or up to 1 year. They are not for long-term borrowing.
• Interest rates are usually higher because of the quick access and short repayment term. Rates depend on your credit and the lender.
• Some loan providers may allow interest-only payments with a lump sum principal payment at the end.
• Approvals happen faster with bridge loans since they meet immediate short-term needs. But review the terms carefully and have a plan to repay on time.