What Is a Caveat Loan & Why Is It A Smarter Choice For Short Term Financing?

A caveat loan, also known as a bridge loan, is used as a means of short-term financing, and clients usually resort to it when they haven’t managed to obtain a more permanent financial arrangement or a long-term loan. It’s true that interest rates for it can be higher (but that’s the exception rather than the rule) and that’s the main reason why people aren’t exactly keen on taking it into consideration when they need working capital.

This kind of loan is mostly used in the construction industry for bridging a gap between transactions, as well as in real estate when a buyer needs the money for the down payment and still hasn’t sold their previous home. Here are a couple of reasons why it should be your choice when it comes to short-term financing.

What is a Caveat Loan?

This type of loan is similar to a mortgage, especially in the sense that there’s a property which is used as collateral for the loan. However, there’s a big difference – a caveat loan is taken out for a significantly shorter period which is rarely longer than 36 months. Moreover, in some cases, the term can be only a couple of days. According to the procedure, it’s required to lodge a caveat document with the government records of land ownership.

A Hassle-Free Procedure

If you’re having second thoughts about opting for this financing method, you should know that it’s usually approved very quickly. Within 24 hours, to be more precise. So, if you’re strapped for time and cash, such a loan can save you in a pinch. Another equally important factor is that you don’t have to worry about a bad credit score because it’s not an obstacle which will prevent you from getting financed.

A Vehicle As Collateral

If you’ve ever taken out a personal loan, you know that there are different types of assets that can be used as collateral. The situation is no different with a caveat loan, but it’s good news that if you own a vehicle you stand a much better chance of receiving a positive answer. The fact that you’re willing to offer your car in order to secure the loan will be perceived as a very favorable indicator by the lender. Besides, the financial market is full of different risks and lenders are more likely to say yes when they see that their investment is safe.

A Flexible Payment Program

Since every person has a different way of managing their finances, it’s good to know that you can opt for a repayment method tailored to your situation. In other words, it’s possible to pay off your loan in fixed monthly installments, or take an early repayment option. The point is that you should check out different lenders and find the most affordable caveat loan which will allow you to organize your payments according to your cash flow and other important factors.

Support Your Thriving Business

If you want to expand your business, a caveat loan can be exactly what you need. Namely, since it’s a short-term option which is additionally secured by a property, its interest rates are significantly lower than those of other loans you can take for your business. This means that you can save the difference in the price that you’d pay if you took out an unsecured loan. Of course, this applies only to successful businesses which are very likely to grow even more. The fact that caveat loans are quickly approved means that your business won’t suffer due to the lack of funding.

It Can Save a Roof Over Your Head

Applying for a caveat loan is the best and most sensible thing to do when you’re facing a foreclosure. According to foreclosure laws, the redemption period during which you can pay for the foreclosure sale price and redeem your property is usually somewhere between two months and a year which is why you need to act quickly and get the money you need before the bidders claim your property.

All these benefits sum up why you should seriously think about taking out a caveat loan next time you need some extra cash to plug the holes in your budget.