An Example of Bridging Finance
With kudos to the new law change from the first of July, many more borrowers are seeking bridging finance. This could only do good for borrowers, as lenders change their packages to become more and more competitive with each other. Personal loans is almost eliminated from the financial market, and bridging finance is growing larger to replace it. However, to qualify for bridging finance, you need to prove your intentions are true. To do so, you must provide paperwork to prove that you really are looking for business or investment opportunities. Documents such as ABN is now a must, and other documents such as your future plans for your bridging finance loan is a good addition.
With business loans in Australia growing at a much faster rate, lenders have made their packages more attractive than ever! However, lenders will need to ensure people are not simply using bridging finance as an excuse to achieve a loan for personal reasons such as holidays, and hence they have toughened up the security and now request documents to prove your intentions. If your intentions are true though, there is nothing to worry about here at all. You may proceed on as normal to achieve bridging finance, and purchase your investment properly, or seize your business investment opportunities.
The main change was due to the fact that bridging finance cause defaults at a considerably lower rate than personal loans. The reason and logic behind this is simple. Personal loans are used as expenses and nothing is gained in return. Once the bills are paid or your holiday time is up, the only thing you gained was a loss in both time and money. Bridging finance is different in the sense that it generates an income, and almost never cause defaults, simply due to the fact that borrowers will be richer than before and have more than enough money to pay back their bridging finance loan.
Still not getting how bridging finance is different to other loans? Let’s say you bought an investment property with the help of bridging finance. Over time, the property value will only increase. It is very rare for properties to decrease in value, and usually the value will increase over time even if it decreased at first. In the end, the property has had an overall increase, and effectively generated income. To add to that effect, you can also rent it to tenants, and you will generate even more income all thanks to bridging finance.
