You may have heard of the terms bridge loan and bridge financing and found yourself wondering what they mean. As its name suggests, a bridge loan is a short-term loan that is granted to help a borrower bridge the gap between a planned expense and a planned income.
For instance, you may be planning to purchase a new house with the proceeds of the sale of another house. However, the gap between the receipt of the latter and the need to spend the former can throw your plans into disarray. That is where bridge financing comes in.
Although bridge loans function much the same way as short-term loans, they have certain features that distinguish them from a standard short-term loan.
Here are some of the key features of bridge financing:
The availability of a loan for a short period of time, usually less than a year
The flexibility to opt for a short and feasible term of repayment
The backing of a collateral security for the loan
A feasible rate of interest
The major benefits of a bridge loan are as follows:
The ability to bridge the gap between your long-term financial goals and your short-term financial capability;
No need to procrastinate important decisions, for instance, the purchase of a house, owing to a paucity of funds;
The option to opt for a repayment tenure that is comfortable for you.
Various leading banks in India offer bridge loans. The following table summarises the interest rates for bridge loans offered by some of the country's leading lenders.
Name of the lender
Interest rate for bridge loans
State Bank of India
10.35% per annum*
Bank of Baroda
10.25% per annum*
12.30% per annum*
Piramal Capital and Housing Finance
16.55% per annum*
These rates are subject to change. It is advisable to check the latest rates before applying for a bridge loan with a particular lender.
If you wish to apply for a bridge loan, then you must first check the eligibility criteria for the same. It is important to note here that the aforementioned criteria vary from one lender to another. Here are the general eligibility criteria for bridge loans in India.
Age: 21 years to 65 years
Tenure of the loan: 1 to 2 years
Quantum of the loan: As per your income and repayment capacity, and the amount of loan requested by you
You can research the eligibility criteria for the bridge loans offered by specific lenders and ascertain whom to take the loan from.
You can easily apply for a bridge loan with financial institutions that offer it. This application can be made online or offline as per your convenience. Here is how you can apply:
Visit the official website of the lender.
Click on 'Apply Now'.
On the application page, enter your mobile number and date of birth (as mentioned on your PAN card) and other details pertaining to your income, work experience etc.
You will get a list of bridge loans available for you to choose from. You can click on the loan you find suitable to check its particulars, including the rate of interest, repayment tenure, etc.
Once you have decided the loan you wish to opt for, you are required to enter the relevant KYC details.
Submit your online application for a bridge loan.
Here are the documents that you must keep handy whilst applying for a bridge loan.
A valid photo identity proof
A valid proof of address
Your recent salary slips and/or income statements
Your recent bank statements
The documents substantiating the clean title of the property you seek to use as collateral (for bridge loan for a house)
The details of the property you wish to purchase (for bridge loan for a house).
Bridge financing is an excellent way to fulfil the chasm between your short-term availability of funds and your long-term goals. You can easily apply for a bridge loan in India at feasible interest rates.
There are certain times when you may need to make an important purchase, but owing to a paucity of funds, you may find it difficult to go through with the payment. When in need of funds to meet your short-term financial requirements, a bridge loan is the ideal form of borrowing. Along with flexible repayment tenures, and lucrative rates of interest, this loan is also backed by collateral. The next time you are looking for any kind of loan, visit the Bajaj Markets website; our partners offer a wide variety of loans, including home loans.
Since a bridge loan is a short-term loan, its repayment tenure is usually below 2 years.
The time it takes for your bridge loan application to be processed depends on the lender you have selected for the loan, and their processing time for said loan.
Although the loan to value ratio for a bridge loan varies from one lender to another, this ratio is usually between 80% to 90% of the value of the collateral property used for the loan.