Bridge loans and commercial loans are both types of loans that are backed up against a property. A bridging loan usually has more to do with getting access to a property through quick cash, while commercial loans will take longer to go through, but still with the aim to provide money to buy a property.
Today, we take a look at the major differences between the two and what each is more useful for.
Purpose of the Loan
As stated above, bridge loans are short-term loans that can even last a few days. This sort of loan is useful for buying property quickly before it goes off the market. This is ideal for anyone in property developers looking to either flip a house or sell the property forward at a profit.
Commercial loans often take a lot longer to be paid off, although in smaller amounts and are more commonly used to buy properties with the purpose of owning them for commercial use, such as creating an office space.
Higher Interest on Bridge Loans
Bridging loans are often available at a higher interest rate than commercial loans. While the commercial loan interest may be spread over a long time to be completed in small payments, bridge loans come with many risks attached to them for lenders and can’t come with low interest rates.
The Idea behind a bridge loan is that it will be paid back soon and hinges on the property being successfully flipped and sold forward. If that doesn’t happen in time, there’s a chance the lender loses out. To avoid the associated risk, higher interest rates are charged to make back losses.
One similarity both of these types of loans have is that they are backed against the bought property as collateral. So, if you fail to make it through on the payments of either one of these two types of loans, you’re likely to get the property repossessed by the lender or bank you took the loan from.
If you’re interested in investing in real estate loans to either develop or own commercial properties, get in touch with our team at Commercial Private Equity in Atlanta, GA. We offer all sorts of bridge loans, commercial loans, and other private equity loans. Contact our team to apply for a loan today.