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    What is a Bridge Loan?

    Bridge loans are short term loans taken to meet short term financial requirements. Bridge loan can be used to secure working capital requirement till the funding goes through. These loans are usually provided for a short term ranging between 2 to 3 weeks and require collateral or security. The loan amount provided and the interest charged are dependent on the borrower’s repayment capacity.

    Bridge loan is a financial arrangement where the borrower can get access to Short Term Loan to meet short-term liquidity requirements. It is also called as ‘Swing loan’, ‘Interim financing’ or ‘gap financing’. Bridge loan is taken for a period of 2 to 3 weeks. The loan extends for a period of 12 months. This loan is usually backed by asset collaterals.

    Features of Bridge Loan

    The features of bridge loan are as follows:

    • Short term loan.
    • The loan is backed by collateral security.
    • The loan amount depends on the repayment capacity. The cost includes stamp duty charges, registration fees and transfer fee subject to a maximum of Rs.50 lakh or four times the gross annual income, whichever is less.
    • The borrower will have to repay the loan by paying equated monthly instalments or paying interest till the entire loan is repaid within 2 years.
    • The rate of interest depends on the loan amount and the capacity of the borrower to repay and the collateral that is being offered. The rate of interest also depends on the estimated sale price of your home.

    Bridge Loan interest rate

    If you have taken a bridge loan in India, then the existing home has to be sold within a year and the loan must be cleared off. The EMI is based on the outstanding amount in the account. The bridge loan rate of interest is extremely high. If you are getting a lower rate of interest on the home loan, then you might as well take the home loan as it accompanies other offers such as refinancing and online account access, etc.

    How does Bridge Loan function in India?

    The bridge loan can be structured in the following two ways:

  • You can either pay off the liens on your existing property, or
  • You can use second mortgage on top of the liens.
  • If you are paying off the liens on your existing property, then the remaining amount can be used to pay the down payment for your move-up house. Instead of making monthly payments on the loan, you will be making mortgage payments on your new house.

    If you are using second mortgage on top of the liens, you will be making mortgage payments for existing home as well as the move-up home.

    When you are applying for a bridge loan, be cautious and ensure that you can pay off the loan in a year. It is advisable that you finance your down payment with your own shares, other assets or stocks.

    Bridge loans offered in India

    Following are the bridge loans offered in India:

    HDFC Bank Bridge Loan

    HDFC Bank offers Short Term Bridging Loan to help you in the interim period between the sale of your old house and a purchase of a new one. Interim security as required by HDFC must be submitted.

    Features

    • Repayment is made through monthly instalments of simple interest with lump sum principal repayment when the tenure ends.

    • Easy and hassle free process.

    • Zero prepayment charges.

    • The loan can be serviced through any HDFC Branch in India.

    Eligibility

    All proposed property owners and co-applicants.

    Loan amount

    The maximum loan amount offered is:

    Loan amount

    Maximum amount funded

    Up to Rs.75 lakh

    80% of the cost of the property

    Above Rs.75 lakh

    75% of the cost of the property



    Loan term

    The loan is offered for a tenure of 2 years. This depends on the customer profile and other applicable terms.

    Interest rate



    • Interest on any loan amount for residential property is 12.30% per annum. RPLR minus spread is 16.30%-4 = 12.30%.

    • Interest on any loan amount for commercial property is 13.15% per annum. RPLR minus spread is 16.30%-3.15 = 13.15%.

    Bank of Baroda Bridge Loan

    Features Bridge loan is offered to the top rated corporate clients against expected equity.
    Eligibility To know if you are eligible for the loan visit the nearest Baroda Bank Branch.
    Loan amount The loan amount depends on the repayment capacity of the borrower and the collateral he is offering.
    Loan term This facility is provided for a term not exceeding 12 months.
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