A bridge loan is a form of short-term financing which extends a line of credit to a borrower for a short period of time, typically at a very high rate of interest. As the name suggests, a bridge loan bridges the gap between more permanent methods of financing; these loans are sometimes used in the real estate industry.
Some disadvantages include: Higher Interest Rates: You may have to pay a higher interest rate for bridge loans. Since these loans are provided in anticipation of future cash inflow, there is higher risk. As such, the interest charged for bridge loans tend to be on the higher side.
A bridge loan is a type of short-term loan, typically taken out for a period of 2 weeks to 3 years pending the arrangement of larger or longer-term financing. It is usually called a bridging loan in the United Kingdom, also known as a “caveat loan,” and also known in some applications as a swing loan.