Bridging loans are loans that serve a purpose when you are in a particularly tight spot, and you don’t have money at hand, and the loan you have applied for hasn’t been approved yet. A bridging loan is a short term loan that ‘bridges’ the gap between the sale of a property, or a debt that you are to repay, or the gap between a property transaction and the approval of a loan you have applied for.
Since this is not a typical type of loan, a bridging loan is very expensive, because it is a short-term option that you take when you are in very dire straits.
Who Needs A Bridging Loan?
Bridging loans are necessary for you if you are in a situation where you have to pay out huge sums of money while waiting for certain funds, such as a loan, to be available. Bridging loans are available for people in dire need of money to pay for things like mortgage, to complete a property sale or something that requires a lot of money. People who plan to bid on items at auctions also fall into this category, as well as landlords and novices at property development.
What Can A Bridging Loan Help With?
Bridging loans can help you out with certain things that may be frustrating you, such as:
- Bridging loans can help you when you want to complete the payment on a new house but haven’t finished settling your financial commitments on the house you are currently in. In this instance, a bridging loan will provide you with the funds you need to clear the payments on the existing house and pay for your new house; or you can pay for your new house even as the payments for the existing house haven’t been cleared.
- Bridging loans can come in handy in the case where you have just finished renovating your house and you want to sell it immediately.
- A bridging loan can help when you want to buy a house at a house auction.
The essence of a bridging loan is that it is a short-term financial solution to your immediate financial problem, but this loan comes with a very high-interest rate.
When Are Bridging Loans Most Useful?
Bridging loans are most useful when used for investing in property when used for development purposes, when to buy property, or when to give property for rent. However, some people take out bridging loans for the simple reason that the personal loan they have applied for is taking too long to be approved. So, it could be said that bridging loans are useful as shortcut ways to get a loan faster.
Bridging loans, as said earlier, are short-term loans, but people seem to go for them more and more, mostly without knowing the full implications of taking those loans.
As such, bridging lenders are increasing because banks and building societies are hesitant to give bridging loans to customers during a financial crisis: the inadequacy of funds to pay for your new house.
Bridging loans attract high-interest rates, a hefty administration fee, and the likelihood being swindled depending on where you get the loan from.
Before getting a bridging loan, carefully assess your needs and what you want to get the loan for, and how much you earn and can afford to pay back monthly. Bridging loan payments can be as high as 18% per annum; so looking at a second or third option is advisable before settling for a bridging loan.
Where Can You Apply For A Bridging Loan?
Getting places to obtain a bridging loan is not difficult. Banks, moneylenders, and other financial institutions offer bridging loans, as well as individuals. However, it is important that you get a loan from a certified, licensed, regulated, and legal financial institution. Banks offering this loan in Singapore include Standard Chartered Bank Singapore, DBS Bank, and OCBC amongst others.
Moneylenders also offer bridging loans to you if you need them, and you can look up legal, licensed moneylenders to find out where you can go to borrow money. Moneylenders have a bad reputation for being dupes and scammers, but with the regulatory board in place for moneylenders, you can be sure to find out which moneylenders are scammers and which are legitimate.
There are currently 170 moneylenders registered with the Ministry Of Law, and you can check their website to see the list of registered moneylenders in Singapore. To verify their licenses, you can also look them up on the website of the Ministry of Law.
Moneylenders offer two types of loans: secured loans and unsecured loans. A secured loan is one that you need collateral to be able to obtain, and the amount is you can borrow with a secured loan is virtually limitless. An unsecured loan can be obtained with a look at your credit report and your ability to repay your loans. The amount you can borrow depends on your annual income.
Obtaining bridging loans from moneylenders is very possible, as long as you verify the moneylenders.
Obtaining bridging loans in Singapore is an increasingly common occurrence because living in Singapore without getting a loan means you are among the few earning up to S$120,000 annually. Bridging loans come in handy when you need to sell your house, buy a new house, develop a property, or let property, i.e. rent.
While bridging loans may be the perfect solution to obtaining huge amounts of funds in a pinch, the interest rates are high, and you may not be eligible to get other loans once the lenders see that you are repaying a bridging loan. Bridging loans are short-term loans, which means you have to pay them back within a short period of time.
Before you take out a bridging loan, make sure you assess your income and your budget before taking that step. Also, it would be wise to consider other options before settling on a bridging loan.