When you take out a form of credit, one of your most crucial tasks is to research and understand your options to better choose and make the most out of your choice. Two of the most popular forms of credit would have to be the traditional bank loans and bridging loans. It is however important to keep in mind that these two are different. As a matter of fact, they belong to either ends of a pole. So how exactly do they differ? Are they even alike? Find out by reading on below.
As per definition…
Traditional Bank Loan – This pertains to the most common type of credit for both businesses and individuals. It is the amount of money lent at an interest by a bank to a borrower for a certain period of time, oftentimes under a collateral security however unsecured agreements may also be available depending on the borrower’s creditworthiness.
Bridging Loans – It is a form of borrowing where a certain sum is lent and issued to a borrower to be used to cover an interval between two transactions. It is uses until either permanent financing is secured or an existing obligation is taken out.
As per period of time…
Traditional Bank Loans – This type of credit is for the long run and its use is often aimed for long term purposes rather than otherwise. This is why the payment for such type of credit or third party financing will also spread out for much longer, usually a couple of years, depending on the terms agreed upon by both borrower and lender.
Bridging Loans – Because bridge loans are designed as an interim financing and a stop gap measure, it is directed to fulfill and provide for short term needs in contrast to the above. It’s payment will be spread out from a few months to a much shorter number of years, again depending on the agreement signed by both parties.
As per paperwork and application…
Traditional Bank Loans – Taking out a loan from a bank and similar other financial providers is considered more meticulous and tiresome. A lot of paperwork and documentation will have to be filed such as but are not limited to application forms, tax credentials, corporate books and financial reports, credit history and more. Moreover, the time from application to approval can be pretty lengthy.
Bridging Loans – Although less of a hassle, there are still documentary requirements needed when applying for bridging loans albeit not as much as traditional credit from banks and similar providers. Furthermore, approval rates are higher and are released much faster.
Learn more about bridging loans here http://www.alternativebridging.co.uk