A Bridge Loan is a short-term loan used to meet immediate financial needs until a long-term financing option is arranged or an existing obligation is fulfilled.
A Bridge Loan acts as a temporary financial solution to “bridge the gap” between two transactions. It is commonly used in real estate, business financing, and corporate transactions where quick funds are required before receiving expected funds from another source.
For example, homebuyers may use a bridge loan to purchase a new property before selling their existing one. Businesses may use it to manage cash flow gaps or fund operations while waiting for long-term loans or investment approvals.
Bridge loans are usually short-term (a few months to a year) and carry higher interest rates compared to regular loans due to their quick approval and short duration. They may be secured against assets like property or other collateral.
While bridge loans provide quick liquidity, borrowers should carefully evaluate costs and repayment plans before opting for them.
"A homeowner wants to buy a new house for ₹80 lakh but has not yet sold their existing property. They take a bridge loan to fund the purchase and repay it once the old house is sold."