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Simple English definitions for legal terms
bridge loan
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A quick definition of bridge loan:
A bridge loan is a short-term loan that helps cover costs until you can get more permanent financing. It's like a temporary band-aid until you can get a long-term solution. For example, if you're buying a new house but haven't sold your old one yet, a bridge loan can help you cover the down payment until you sell your old house and get the money you need. It's important to remember that bridge loans usually have higher interest rates and fees, so they should only be used when necessary and with caution.A more thorough explanation:
A bridge loan is a short-term loan that is used to cover costs until more permanent financing is arranged. It is also known as a swing loan. For example, if someone is buying a new home but has not yet sold their current home, they may take out a bridge loan to cover the down payment and closing costs on the new home until they sell their current home and can pay off the loan.
Another example is a business that needs to cover expenses while waiting for a larger loan to be approved. They may take out a bridge loan to cover the costs until the larger loan comes through.
Overall, a bridge loan is a temporary solution to cover expenses until a more permanent financing option is available.