bridge loan
A bridge loan is short term borrowing to cover a gap until money you are expecting arrives, and it is expensive by design.
In plain English
You are buying a property and selling another, and the dates do not line up. Or a large invoice will be paid in ninety days and your suppliers want money now.
A bridge loan covers that gap. Short term, secured against something, and considerably more expensive than ordinary borrowing, because the lender is moving quickly and taking on the risk that the money you are expecting does not actually arrive.
Used properly it is a genuinely useful instrument, and it is what lets a transaction happen at all.
Used carelessly it is a trap, and the trap has a shape. The bridge is priced on the assumption of a short life. If the sale falls through, or the client pays late, or the refinancing does not materialise, you are now carrying very expensive short term debt with no exit, and the cost compounds while you look for one.
So the only question that matters before taking a bridge is not the rate. It is what happens if the thing you are bridging to does not arrive.
If you have no answer to that, you are not building a bridge. You are stepping off a cliff and hoping.
You take a six month bridge loan expecting a property sale to complete. The buyer withdraws. You are now carrying expensive short term debt on an asset you cannot sell quickly, and the interest is accumulating every month.
Questions people ask
Why are bridge loans so expensive?
Because they are short term, arranged quickly, and the lender carries the risk that your expected money does not arrive.
When is a bridge loan sensible?
When the incoming money is genuinely near certain and the timing gap is the only problem. Certainty is doing all the work in that sentence.
What is the biggest risk?
That the expected money is delayed or never comes. You are then carrying expensive debt with no exit, and the cost keeps growing.
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