Find out all about your options for bridging finance

WHAT IS INTERIM FINANCING?

Interim financing helps you to get a quick loan. For example, you can use it to bridge the time until a long-term loan is paid out. This form of financing is also often used to provide interim financing until the sale of a property or collateral. You can also use interim financing to fill the gap until your next salary in the event of unexpected payments.

Examples:

• You want to buy a new property, but first have to wait for the old one to be sold.

• Your washing machine breaks down or a car repair is due and you still have to wait for your salary.

• You have found a good deal on a used car, but have to wait for a buyer for your current vehicle.

HOW DOES INTERIM FINANCING WORK?

Before you take out interim financing, you should know exactly how much money you need and how you can repay your loan. Depending on the loan amount you need and your situation, there are various interim financing options available to you. However, the process is similar.

1. Application and check: You submit a loan application, which is checked by the bank, pawn shop or other providers. For a pawn loan, you only need one collateral item as security; banks usually also require a good credit rating, additional collateral and a repayment plan.

2. Assessment: The bank assesses your situation and then decides whether you can get a loan. Additional collateral such as real estate, securities or a guarantee can be helpful for a positive decision. In the pawnshop, on the other hand, only your item is assessed.

3. If approved, you will receive your money in your account within 1-5 working days, depending on the provider. Depending on the loan amount, a pawn loan can also be paid out directly in cash (up to EUR 9,999).

4. Most bridging loans are bullet loans. This means that you only repay the original amount you borrowed at the end of the agreed term. Repayment usually takes place as soon as your actual financing option becomes available.

5. If you have used collateral as security for the interim financing, it will be released again after the loan has been repaid.

WHAT REQUIREMENTS DO I HAVE TO FULFILL FOR INTERIM FINANCING?

That depends entirely on your lender. Apart from being of legal age, you must meet the following requirements:

BANKS

• Credit check: To obtain financing from the bank, you must have a good credit rating. This includes, for example, regular salary receipts, existing loans or other financial obligations.

• Repayment plan: In order to obtain interim financing, the bank needs a comprehensible repayment plan from you. For example, you can state expected cash flows such as the sale of a property or an insurance payout.

• Further collateral: If your income is not sufficient or your financial situation is too uncertain for the bank, other collateral may be required from you. This includes, for example, real estate, securities, life insurance or other assets.

• Intended use: For interim financing, you usually have to inform the bank of the intended use for the money.

• Taking out insurance: Some banks require insurance to be taken out when granting a loan. This can cover possible occupational disability, for example.

PRIVATE INDIVIDUALS (VIA PLATFORMS)

• Credit check: A credit check is also usually carried out by private lenders via various platforms.

• Financial situation: In most cases, you will need to provide details of regular payments into your account. As a rule, you also have to state a purpose of use.

• Depending on the loan amount, further documents such as salary slips may be required.

DEPOSIT HOUSES

• Collateral: To obtain a pawn loan, you need a suitable item of collateral that you can deposit as security. A partial amount of the value will be paid out to you without any waiting period or further requirements.

HOW DO I REPAY MY INTERIM FINANCING?

If, for example, you need interim financing until the sale of a property or longer-term financing, a bullet loan is common. You only pay back the amount borrowed at the end of the term. During the term, you only pay the interest and fees. The term for interim financing is usually a few months to a year. Some providers also allow partial repayments, but you should ask about this option before taking out your loan.

With pawn loans, you pay the interest and fees together with the loan amount at the end of the term. You can redeem your item with your repayment, but you can also pay only the fees and extend your pawn loan as often as you like.

ADVANTAGES AND DISADVANTAGES OF BRIDGING FINANCE

The risk of getting into financial difficulties if the financing is not covered is higher. Pawn loans are an exception - you remain debt-free and only lose your item if it is not repaid.

FURTHER ADVANTAGES AND DISADVANTAGES

WHAT INTEREST RATES AND CONDITIONS SHOULD I EXPECT?

The interest rates for bridging finance are generally higher than for long-term forms of credit. This is because the risk for the lender is higher and in most cases the money has to be made available quickly. The term for bridging finance is usually short, as it is only intended to bridge the gap until an alternative is available.

How high the interest and fees actually are depends on the provider, of course. Most companies offer calculators on their websites that show you the conditions before you take out the loan. The fees depend, among other things, on the loan amount and the term. They usually include interest, any fees and, in the case of personal loan brokers, a commission.

WHEN DOES INTERIM FINANCING MAKE SENSE?

Whether bridging finance makes sense always depends on the individual situation, of course. Below you will find a few examples of situations in which this form of financing can be an advantage for you:

1. You urgently need capital: For example, for a real estate purchase or an investment opportunity.

2. You have to wait for main financing: There is a gap until your long-term financing that you have to bridge.

3. Stay liquid: You expect planned income in a short period of time, but you have to bridge the time in between to avoid becoming insolvent.

FREQUENT QUESTIONS

When is bridging finance typically used?

Bridge financing is particularly popular in the real estate sector. Be it to bridge the time until the sale of an existing property or to fill the gap between the possible start of construction and the cash flow for long-term financing.

Pawn loans are also often used as interim financing for the financing of cooperative shares or the provision of own funds.

What requirements must be met for interim financing?

As a rule, certain collateral should be available. In pawnshops, collateral is sufficient to pay out financing; banks also check creditworthiness and often require a repayment plan (e.g. planned sale of a property) and the intended use.

How is interim financing repaid?

In most cases, these are bullet loans. This means that only the interest and fees are paid during the term of the loan. At the end of the term, the loan amount borrowed is repaid.

What is the term of interim financing?

Repayment is usually made after a few months to a year.

What are the advantages of bridging finance?

The loan amount is paid out quickly. This makes it possible to make time-critical investments or purchases or to avert insolvency.