WHAT IS THE DIFFERENCE BETWEEN BRIDGE LOANS AND BONDS?

I assimilate which overpass loans assistance companies get to a brand new theatre of financing, but what have been the core differences. Do overpass loans have higher interest? More risk? Etc..

{ 1 comment }

Mohammad September 28, 2013 at 1:19 pm

1. A bond is in the form of a security. It can be sold and transferred to another person. Generally(though not necessarily), bonds are issued in mass borrowing programmes through public issue. Bonds can be subscribed by institutions as well as by individual investors. Generally, bonds are on secured basis.

2. There is no marketable instrument in respect of bridge loans. Bridge loans are obtained from one or a handful of banks/financial institutions. Generally, bridge loans are on unsecured basis. However, the borrower gives an authorization to the banks/financial institutions who are considering grant of regular loan to repay the bridge loan from the amount to be disbursed to the borrower.

3. As regards interest rates, generally bridge loans carry more interest rates than bonds.

4. As regards risk, it will depend on the quality of the borrower.

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Bridge Loans:
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A bridge loan is a type of short-term loan, typically taken out for a period of 2 weeks to 3 years pending the arrangement of larger or longer-term financing. It is usually called a bridging loan in the United Kingdom, also known as a “caveat loan,” and also known in some applications as a swing loan.

http://en.wikipedia.org/wiki/Bridge_loan

Bonds:
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A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity.

The “quality” of the issue refers to the probability that the bondholders will receive the amounts promised at the due dates. This will depend on a wide range of factors. High-yield bonds are bonds that are rated below investment grade by the credit rating agencies. As these bonds are more risky than investment grade bonds, investors expect to earn a higher yield. These bonds are also called junk bonds.

http://en.wikipedia.org/wiki/Bond_(finance)#Credit_Quality
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