Bridge Loan Pros and Cons: Is Short-Term Financing Right for You?

Smart investors know timing and financing are everything—knowing when to move and when to refinance can make all the difference in scaling your success. Considering bridge loan pros and cons can help you make informed decisions to help you scale your success. 

In real estate, time is money. The longer it takes to close a deal, the more likely it is that your competition will beat you to it. That’s when a bridge loan can help—by providing quick funds for acquisitions while you secure another property or when you need to cash out equity. Wondering if a bridge loan is right for you? Read more and consider all the pros and cons that come with taking out a bridge loan.  

What is a Bridge Loan?

A bridge loan is a short-term loan designed to “bridge” the gap between when you buy a property and when you secure financing. For example, a bridge loan can help you buy a distressed property to repair and sell for a profit. Alternatively, it can help you finance a new construction project or buy a property while you arrange long-term financing. 

At Asset Based Lending, bridge loans have terms of 12-24 months with no prepayment penalty, giving you the flexibility to enter and exit deals fast. 

Bridge Loan Pros and Cons

There are many benefits that come from taking out a bridge loan. Keeping in mind these bridge loan pros can help ensure you get the most out of your loans.

Short-Term Bride Loan Pros:  

• Fast approval and funding. Short-term bridge loans provide fast capital for investors who need to acquire or refinance a property without delays from traditional lenders. For example, ABL can pre-qualify you within 24 hours and close on loans in as few as 20 days. 
• Flexible lending criteria. Compared to conventional mortgages, bridge loans tend to be more flexible on loan terms, including repayment structures and loan size. ABL bridge loans can vary anywhere from $75k to as much as $50 million.  
• Close on your terms. As a hard-money bridge lender that funds every loan in-house, Asset Based Lending gives you full control over your closing timeline, with no waiting on third-party investors. 
• Ideal for investors. Bridge loans are ideal for fix-and-flip or new construction projects where you only need capital for a short period before exiting the deal. Whether you’re funding a property prior to selling or refinancing an existing loan, bridge loans are designed with your investment goals in mind.  

Of course, short-term bridge loans aren’t for everybody. Different investment goals require different loan types, and it’s important to know exactly what you need before investing.  

Cons of Short-Term Bridge Loans: 

• Higher interest rates. Compared to long-term mortgages, bridge loans tend to have higher interest rates. Keep in mind that if you qualify with Asset Based Lending, your rate could be as low as 11%. 
• Shorter repayment window. Loan terms for bridge loans can range from 12 to 24 months. One to two years is a short window, requiring borrowers to have a solid exit plan. Because of this, investors who take out short-term bridge loans should know in advance what they want to do with their investment.  
• Not suitable for long-term investors. It’s important to note that bridge loans aren’t for buy-and-hold investors. Those who are considering long-term investments should consider DSCR rental loans instead.  

Understanding Bridge Loan Pros and Cons: When Investors Use Bridge Loans 

Investors who know the ins and outs of bridge loan pros and cons know exactly how to move in the market. When investors are going after a short-term bridge loan, it’s often for one of these reasons:  

• They’re attempting to purchase and investment property in a strong, competitive market.  
• They’re looking to refinance an existing loan to cash out equity or lower their rate.  
• They’re planning to fund a property prior to selling or financing.  
• They want to avoid delays caused by traditional underwriting timelines.  

Consider the Bridge Loan Pros and Cons Before Qualifying with ABL 

Having this handy list of bridge loan pros and cons is the first step to making your next informed decision. When the right opportunity comes along, you’ll want to be prepared and work with a lender who moves as fast as you do. With over 10,000 loans funded, Asset Based Lending offers the experience needed for investors of all levels.  

And the best part? Pre-qualifying for a bridge loan from Asset Based Lending is fast, straightforward, and won’t affect your credit score. Filling out our pre-qualification form will only take a few minutes—and once you submit, it will only take our loan experts a day or two to connect with you. If we think your deal is a good fit, we’ll be more than ready to discuss the details and next steps.  

Do you have an investment in mind and you’re ready to get the ball rolling? See how you can benefit from a loan while understanding the bridge loan pros and cons that may happen along the way. Pre-qualify with Asset Based Lending now to get your deal on the table and bring your investment to life.