Bridge loans are used in real estate, when a person may wish to buy an expensive larger home by selling his or her earlier house. Selling a house usually takes a few months or longer, so the buyer will take a bridge loan to meet the short term gap. Most people take a bridge loan to get a lower interest loan with better repayment terms later.
The lender of the bridge loan will usually be protected as the Loan is related to the value of the project/property. The value of the project usually increases as the different stages of construction of the property are completed, therefore lessening the lender’s risk. These are considered risky loans and usually the lenders have to be convinced about the buyers investment.