If you ever asked yourself “how does bridging finance work in South Africa?”, we have the answer for you!

With South Africa’s current inflation, making sure you have the funds your property requires can be a challenge. This is where bridging finance comes into the picture, offering a temporary solution to for the financial gap you need to cover. But how exactly does bridging finance work in South Africa? That’s what we are going to discuss!

So, in order to help you understand more about it, let’s talk about what bridging finance is and how it works. Find out if it is a good option for you. Also, if you want to check out more financial tips on our website, you can click on this link!

What Is Bridging Finance?

Also known as a bridge loan, is a short-term loan designed to “bridge the gap” between your current financial situation and a future event that will resolve your cash flow issue. Think of it as a temporary financial solution to tide you over until you secure a more permanent funding option.

Picture this, you’ve found your dream home, but selling your current property takes time. Bridging finance steps in, allowing you to put down a deposit and proceed with the purchase of your new home without the sale of your current one hindering the process.

Keep in mind that, due to the short-term nature of the loan and the associated risk for the lender, most of the times, it comes with higher interest rates compared to traditional loans. The repayment periods can range from a few months to a year, so make sure you have a clear plan to repay the loan within the stipulated timeframe to avoid accumulating debt.

How Long Does it Take to Get Bridging Finance?

Compared to traditional loans, it offers a faster turnaround time. Depending on the lender and the complexity of your situation, securing bridging finance can take anywhere from a few days to a few weeks, with repayment expected once bridging loan’s purpose is fulfilled.

Banks usually take five days or more to evaluate a client’s financing requests, while alternate lenders can release funds within 24 hours. Ultimately, it will depend upon the lender and the criteria used to assess the application. Here are some factors that can influence the processing time:

• Completeness Of Your Application: ensure you submit all the required documentation accurately and promptly to expedite the process, otherwise it can delay the process;
• Property Valuations: the time it takes to obtain valuations for both properties can impact the overall processing time;
• Lender’s Internal Procedures: different lenders may have varying internal approval processes that can affect the turnaround time.

How Does Bridging Finance Work in South Africa?

1. Approach a Bridging Finance Lender: several lenders in South Africa specialize in bridging finance. Research and compare different lenders to find one offering competitive rates, terms, and a loan amount that aligns with your needs;

2. Submit a Loan Application: the application process usually requires you to submit various documents, including proof of income, property valuations for both your existing and new property, and your purchase agreement for the new property, or any valuation needed according to your type of bridge financing required;

3. Loan Approval and Valuation: once your application is submitted, the lender will assess your financial situation and the value of the properties involved, according to the type of bridge financing. Based on this evaluation, they will determine your eligibility for the loan and the maximum loan amount you can qualify for;

4. Loan Agreement and Security: upon approval, you will be required to sign a loan agreement outlining the terms and conditions of the loan, including the interest rate, repayment period, and any fees associated;

5. Receiving the Funds: once all the formalities are complete, the lender will give you the approved loan amount. You can then use these funds to cover the down payment and other initial costs associated with your goal.