What is a bridge loan?

A bridge loan is a special type of credit that is used when there is an immediate need for financing. Its main uniqueness is its temporary nature, since it is granted only until the final loan is formalized, as long as the debtor ensures a future income. That is, the borrower must offer a guarantee of future income that ensures the return of the credit. Without this support, the financial institution will not grant the credit.

Just as a bridge is a construction that allows us to save a geographical accident and get to the other side, the bridge loan allows the applicant to go from one economic situation (need immediate financing) to another (get more extensive financing in the future nearby ) to achieve your goal (buying a home, for example). It is a short-term financing that occurs between the processing of two long-term loans.

 

Characteristics of a bridge loan

bridge loan

Although a bridge loan can be requested for business projects, its most frequent purpose is to be able to acquire a new home without the need to sell the current property quickly and under less advantageous conditions. Among its main characteristics are the following:

  • Have the main purpose of acquiring a new home for which some type of advance payment is required. That is, an immediate need for financing arises and we want to have a reasonable time to sell the current house, without the need to quickly sell it.
  • It is a temporary loan , since it is a temporary financing until the final credit is formalized. In fact, most entities grant a term of between two and five years, which they consider a sufficient margin so as not to “undersell” the main home at a price lower than the one set by the market.
  • They usually require more stringent requirements for their concession, since it is a financial product that involves greater risk for the borrowing entity (that the debtor is not able to sell the home and does not have the financial capacity to repay the loan). Thus, the applicant must provide a solvency guarantee or future income that ensures the return of the credit. Without this guarantee, the financial institution will not grant the credit.

 

Advantages of applying for a bridge loan

applying for a bridge loan

As we saw in previous lines, this type of financing is usually used to buy a home while the current one is in the process of being sold, which is why in the financial environment it is also known as a bridge mortgage.

The advantage of requesting a bridging loan is that the installment can be negotiated in such a way that it is paid with a lack of capital, that is, that capital is not amortized and only interest is paid. You can also negotiate a reduced special fee less than what will be paid once the mortgage is signed, so that it is comfortable for the client during the time that the initial house has not been sold.

However, once the term for the sale of the property has elapsed, if it has not occurred, the shortage (or in your case the special fee) will end, turning the credit into a conventional mortgage loan, with a system of usual amortization. If, on the other hand, the sale has been made, the money obtained may be used to amortize the outstanding amount of the first mortgage loan, as well as that of the bridge loan.

 

Ways to pay a bridge loan

Ways to pay a bridge loan

While the principal (or principal) plus interest is paid on personal loans or mortgages, during the two or five years of the bridge loan, your installments can be paid in three different ways:

  • Quota with lack of capital: only the interest of the loan is paid, without amortizing capital pending repayment.
  • Reduced special fee: a fee is paid less than that which will correspond when the current home is sold. Thus, the installment contributed each month is mainly intended to pay interest.
  • Normal fee: as usual in this type of financial products, principal plus interest is amortized.

 

Disadvantages of the bridge loan

bridge loan

Following the crisis caused by the housing bubble in our country, uncertainty is the order of the day in the home buying and selling market. Thus, although at first glance five years seems like a more than sufficient period to sell our house, we may not be able to formalize the transaction in the agreed time. Here the problems begin. Precisely, the main disadvantage of this financial product appears when, once the grace period ends. Thus, if we have not been able to sell our home, we will have to return the total loan, that is, the principal plus interest.

In addition, due to the double risk they assume, traditional financial institutions require guarantees and guarantees to ensure the operation. Thus, the study of each case is usually slow and cumbersome, and is only intended for very specific clients of the bank.

Therefore, we only recommend this type of financing when you do not have another alternative and you have verified that we are at a time of economic growth or stability in the real estate market.

Another option is to go for personal loans or quick loans. At Moneypoint we have designed the first line of credit for individuals that makes up to 5000 dollars available to you that you can return in comfortable monthly installments for a maximum of three years, with no management, opening or cancellation fees. In this way, if what you need is a small injection of liquidity to provide a signal in the purchase of an apartment, car or to start up your SME, this is the fastest and most flexible way of obtaining the money.

To finish, our advice is that whatever the financing method you choose, always make sure that you have a healthy economy to face the payment of installments or any other eventuality that may arise during the period of the loan. In no case is it advisable to purchase a financial product that does not fit our current or future situation.

Myths about sms loans

There are many myths and rumors of sms loans being erroneous, so we think it might be appropriate to look at these myths and see how true they are. It is mainly young people around 20 years who take sms loans

At Good Credit, this is not true anyway. The largest age group with us is 25 – 34 years and only 27.5% of those who take sms via us are between 18 and 24 years. Almost 3 out of 4 borrowers with us are at least 25 years old. The average age of their affiliated lenders is 35 – 40 years.

There are many lenders that do not take any credit information

There are many lenders that do not take any credit information

There are many who believe that lenders that offer sms without UC do not take any credit information at all. Even in one of our evening newspapers, a journalist wrote that there are sms lenders who claim that they do not take any credit information, it is part of their marketing, but it is completely wrong.

The journalist should know the difference between not taking a credit report at UC and not taking any information at all, but that may be too much to ask. The lenders who sign that they offer sms loans without UC do not take credit information from the Information Center (UC) but instead collect their information from another credit reporting company.

All fast loan companies are legally obliged to take a credit report and so do they, at least at present. Sure there have been some lenders over the years who have neglected this but they have been sold off. And the lenders who have taken credit information with too little information or been too generous in their assessments have often been warned by the Swedish Consumer Agency.

You usually pay several hundred percents in interest or more

You usually pay several hundred percents in interest or more

You don’t. If you were to pay 200% in interest on what you borrowed, you would have to pay twice as much as you borrowed in interest. Example: You borrow USD 1000 and payback USD 3000 including amortization but it does not work.

Saying that the effective interest rate is 200% does not mean that you pay twice as much in pure interest as the effective interest rate is based on years and not weeks or months on which a regular sms loan is set up. An annual interest rate of 200% corresponds to a monthly interest rate of 16.6%, so if you borrow USD 1000 for 1 month, you pay USD 166 in interest, not USD 2000.

It is certainly no lie that the effective interest rate is often several hundred percent, but it is misleading to give the appearance of the interest cost would be several hundred percents.

The fast-loan industry is almost unregulated

The fast-loan industry is almost unregulated

Nix, the Swedish Consumer Agency has established clear laws and regulations that the fast-loan companies must adhere to and the Swedish Financial Supervisory Authority reviews them. On several occasions, high-speed mortgage companies that misconduct (usually due to slack credit ratings) have been warned and fined, and some have been banned.

This has meant that less serious high-speed mortgage companies have sharpened and those who have not done so have had to close down their business. This has given us more and more serious sms lenders, even though it is still a while until we have a completely room-clean industry.

In the autumn (2018), an interest rate cap and cost cap will also be introduced and the requirements for credit assessments will be tough, so the market is always regulated.

There are no free sms loans because they have a fee

This has been stated many times by the evening newspapers, but it is not true. There are certainly sms loans that are marketed as interest-free even though they have a certain fee, but there are actually free sms that have no interest or fees. However, it is important that you repay everything within the agreed time otherwise it will not be free anymore.

Everyone can borrow, whether you have income or not

No, it’s not either. There are lots of people applying for sms loans who get rejected for their applications. In fact, it is more common to receive a rejection than to be granted, which is because many have far too small margins to borrow. You have to have some kind of income to be able to borrow, although income from an extra job, a temporary job, a temporary job or a project job is often enough, sometimes even A-cash.

Get a loan for loans with a high final rate – despite bad credit or bad credit

If you want to get a car loan with a high final rate, there are a few things to consider. Compared to the loan with the final installment, the monthly installment is significantly higher, which also eliminates the high debt burden at the end of the term, making the car buyer the owner. The leasing loan calculator for installment loans / loans with different final installments / target installments / loan calculation online, free of charge and independently. Because the last installment is significantly higher than the previous monthly installments, lenders want to make sure that the loan can still be repaid in full.

Car loans for low income people

Car loans for low income people

Many people use the offers of dealer banks for car financing. This is not only practical, but may also be the best option for a loan from an independent house bank. This is the case when choosing a car loan with a high final rate, since the monthly installments with such financing are very low.

But who is such a loan useful for? But in order not to have to switch to a car, the dealer bank offers a car loan with a high final rate. The monthly contribution is low and the large amount is payable after the term has expired. Otherwise, the high-level completion rate can be refinanced with another loan.

Single amount must look for a loan

Single amount must look for a loan

Anyone who does not have the means to pay the final installment in a single amount must look for a loan, for better or for worse. An independent house bank is particularly important because it can be cheaper than the house bank of the dealership in terms of interest rates and other conditions. For a car loan with a high final interest rate, the choice of the best banks is important because the interest on the final interest rate makes the vehicle either more expensive or cheaper.

This depends on the loan taken out by the car buyer. If so, it can be difficult to fund the final installment. In principle, an auto loan with a final installment is a high risk of default not only for the credit institutions, but also for the borrower. Finally, she is ready to pay the single balance at the end of the credit period.

However, a lot can happen during this time and without the necessary budget for the last installment, the entire loan can no longer be used. In the worst case, the vehicle is confiscated.

They rejected you! If you were denied a consumer loan, we teach you how to recover

Applying for a loan is easy, but it is not 100% sure that the bank or financial institution you turn to says yes. A large part will have to do with your profile: your income, your debts, your financial behavior, among other points, and also with the amount you are requesting as well as the documents you have presented and how you supported it.

If, after all, the answer ends up being no, it is normal to feel discouraged and want to send everything down. Overall, if they already told you no, does it make sense to keep trying with the same bank or with someone else? It is also valid to get angry, since the denial of credit means that you will not be able to meet the goal you were looking for, whether it be paying for a trip, taking a vacation, paying for your studies, among others.

But rather than taking this as an excuse to throw in the towel, it’s better to look at it as a new motivation to correct certain aspects of your financial life and try again. With a few changes, the next time you request it, you will definitely do better.

So what should you do Get out a pencil and paper and take note of these tips!

 

1. Ask for a reason

1. Ask for a reason

If you were denied the credit, you can consult the advisor who attended you what were the reasons for the refusal. This will give you lights to see what small changes you can implement. Some entities even send you an email or a document explaining the reason for the rejection. Normally, it is common for credits to be denied when they exceed the person’s ability to pay or when it is shown that they have the necessary income to pay it.

 

2. Reduce your debts

2. Reduce your debts

If you have several active credit cards and one or more credits to pay, you will not be well regarded by financial institutions, as your risk exposure is very high. Even if your income is very high, having so many debts shows that you are not managing your cash well.

So, something you can do is eliminate some cards or focus on canceling the credit that you have active. Once your risk exposure is reduced, you will have a better chance of being approved.

 

3. Check your credit report

credit report

You can request this report from a credit center. The idea is that you check the status of your credit history, to see if you are qualified as a risky customer or not. This is a very important point when applying for financing. This will also serve to check if all the payments made were recorded correctly or if there is any debt that you do not recognize and that may harm you.

 

4. Build your history

credit history

If you have never been related to credit, have never had a credit card or applied for credit before, it is normal that there is uncertainty on the part of financial institutions, since they do not know if you are a good or bad payer and you continue to represent a risk. What can you do? One of the easiest steps is to purchase a credit card. It does not mean that you will get into debt, rather, the objective is to use it to make certain purchases that you would make in cash and pay it on time so that you begin to demonstrate your good financial habits.

 

5. Increase your income

salary loans

Something that also works is looking for alternative sources of income, so that you have a greater ability to pay.

 

6. Check the amount you are requesting

6. Check the amount you are requesting

If you are asking for more money than you can pay, it is one of the reasons why they could have denied you the loan. So, ideally, you analyze if that amount is what you really need and according to that, do your calculations to see if you can reduce the amount. Additionally, it will be very useful for you to know what your payment capacity is. How do you know? Add up all your income and then subtract all the payments you need to make. The remaining money, which is “free” is what represents what you could spend to pay off the credit monthly.

Finally, try to have all the documents in order so that there are no problems when presenting them and whoever reviews your application finds everything you need, without exceptions. The clearer the information, the faster it can be managed.

Advertising costs: How households save on building loans

Many households opt for a building loan against the background of low borrowing costs.

after all, your own four walls promise certain financial security, especially in old age.

Before that happens, the home costs money.

Debt interest is to be shouldered for the building loan.

Depending on the general conditions, the interest payments quickly amount to several tens of thousands of USD.

How can the costs for advertising costs be accommodated?

Advertising costs and construction money – how does it work?

Advertising costs and construction money - how does it work?

In principle, a property that is used by the owner is usually not a tax-saving model, since debit interest cannot be deducted here. But: If you use the house or apartment to generate income, the situation is different.

The background to this is the possibility of claiming expenses for professionally induced purchases as advertising costs or operating costs (for self-employed and freelancers). When can a property that is financed through a construction loan enable this option?

  • For professional reasons there is a transfer from Berlin to Hamburg. Daily commuting is eliminated due to the distance, you decide to buy a small 2-room apartment. Since the purchase is being pushed to secure the income, the interest on the debt can be claimed as advertising costs.

Rent out property – interest and depreciation

Rent out property - interest and depreciation

The professionally used second home is one aspect of how you can profit from the purchase of real estate through the advertising costs. What about the rental factor? A cheaply acquired apartment building or the expanded attic are conceivable scenarios that lead to a rental.

In this connection, too, the interest for the building finance is deductible via the advertising costs. However, landlords can pull out completely different registers in the tax return.

For example, the tax offices assume that the property will be “consumed by value”, which will allow depreciation to be deducted. The latter can generally be claimed over two percent of the acquisition costs per tax year. Various operating cost items are also deductible in connection with a rental.

Commercial use: operating expenses instead of advertising costs

Commercial use: operating expenses instead of advertising costs

What does the tax deductibility look like for (partial) commercial use? If you use your own house in parts as an office or warehouse, you can set expenses such as interest on operating expenses. Here, however, it must be ensured that depreciation can turn into a boomerang when a business is dissolved.

Loan agreement: private arrangement or arrangement agreed with a bank

A loan contract is a legal contract between the lender and the borrower. The subject of such a contract is a sum of money recorded in the contract.

It is the task of a loan contract to secure both sides, therefore the most important agreements are fixed in writing in a loan contract and confirmed by the signatures of both parties. The contract is usually for direct lending, and there are also loan contracts for indirect lending.

The loan amount and the agreed interest should be recorded

The loan amount and the agreed interest should be recorded

  • the setting of collateral makes sense (e.g. in the form of assignments or transfers of property)
  • important components such as loan amount, term, interest rate, method of repayment, termination modalities and arrears should be specified in the loan contract
  • an acknowledgment of debt certified by the notary about the amount lent makes sense

As a lender, you should only lend money to relatives or friends that you actually don’t need (even over a long period of time).

Such a contract can be drawn up informally on loans. Nevertheless, you should make sure that all important agreements such as loan amount, interest rate, contract term, repayment method, termination modalities and similar things are mentioned in the contract.

Loan agreement between the bank and a borrower

Loan agreement between the bank and a borrower

In addition, the names and contact details of the parties involved should of course be given. Templates for such loan contracts are now available in a wide variety of variants on the Internet. All you have to do is download, fill in and print it out.

For a loan agreement between the bank and a borrower, for example in the context of mortgage lending, the legislature has issued its own legal provisions. In particular, the so-called pre-contractual information obligation on the part of the bank in the context of consumer loan contracts is regulated here.

  • If the bank does not comply with the regulations on the mandatory information requirements, the borrower can revoke the contract or contest it in court.

Overdue expensive forms of money loans.

Between 2012 and 2013, 35% of Dutch households were red at least once, according to figures from the Authority for Consumers and Markets. At the end of last year, the total amount that the Dutch were in the negative was no less than 12 billion USD. Being in the red is actually too easy. You do not have to make any arrangements. For extra financial space, you only need to go over the amount available in your current account. That’s right where the danger lies. Because a negative balance entails high interest costs.

High interest costs are overdrawn

High interest costs are overdrawn

Too many people are unaware of the high interest that must be paid to the bank before overdraft. Interest rates from 11% to almost 14%, the maximum interest that can be charged, are no exceptions. This interest is considerably higher than the average interest you pay for a loan. Because that is temporarily overdrawn on your current account, of course: a form of borrowing money.

Alternative form of money lending

Alternative form of money lending

In short, being overdone is a waste of your money. There are plenty of alternatives, with which you can obtain extra financial space in a responsible and cheaper way. For example, a revolving credit or a personal loan is already available at an interest rate of 4.6%. Of course, the actual interest depends on your personal situation. But that means that compared to up to $ 2,000 overdraft at Litebank you can be almost 10% cheaper.

Avoid standing red

Before taking out a loan, compare different loans and interest costs. That is the beginning of responsible lending. But realize: borrowing money always costs money. Another tip with regard to overdraft is therefore obvious: avoid overdraft. Start keeping a household booklet today. This allows you to detect and cut unnecessarily high expenditure. Are you already in the red? Then try to redeem this amount. Because saving currently yields less than overdraft, you could use your savings to redeem your negative balance and avoid overdraft in the future.