Generally, a large loan is taken as a loan to buy a house, car, medical treatment or any expensive property, but sometimes we also need a small amount (for down payment etc.) . If you also need instant money for a short tenure, then a bridge loan can prove to be a great option for you.
A bridge loan is basically a short-term loan, which can be used to meet your immediate financial needs. This is a better option for those who do not want to bear the burden of long term loans. If you have a regular source of income, through which you can meet your financial needs sooner or later, then a bridge loan can be a good way to avoid the traditional loan.
Loan can be taken for three weeks to one year
The amount and interest rate offered under the bridge loan completely depends on the repayment capacity of the borrower. Bridge loans are also popularly known as ‘swing loans’, ‘interim financing’ or ‘gap financing’. These loans are taken for an average tenure of 2 to 3 weeks and can be extended up to a period of 12 months.
For this you have to fill a loan application form and submit it to your bank. Along with this, you will also have to provide income proof, identity proof, address proof and passport size photographs. A percentage of the loan amount can be taken as processing fee. The loan amount depends on your repayment capacity.
Pay in EMI
The borrower will have to repay the loan by paying Equated Monthly Installments (EMIs) or by paying interest till the entire loan is repaid. The interest rate will depend on the total loan amount and the repayment capacity of the borrower. Apart from this, the security also affects the interest rate. The current interest rates on bridge loans range between 9% and 18%. A processing fee is charged for these loans which ranges between 0.35% to 2% of the loan amount
Which banks can be a better option
HDFC Bank Bridge Loan is a good option for short term loan in India. This loan, given for a tenor of two years, can be availed from any HDFC Bank branch across the country. In this, the interest rate on loan for residential property is 12.30 percent and interest rate on loan for commercial property is 13.15 percent per annum.
At the same time, SBI Bridge Loan gives loans up to Rs 2 crore for a tenure of two years. The interest rate here (starts at 9.90% for the first year and 10.90% for the second year) is slightly lower than normal.
You can get caught in the big debt trap
You can get instant cash through a bridge loan, but you may have to deal with rising interest rates in it. If you fail to repay a bridge loan on time, then you may fall into a huge debt trap.
