Which of the following is a type of temporary loan?

Which of the following is a type of temporary loan?

• A. Home equity loan
• B. Bridge loan
• C. Fixed-rate mortgage
• D. FHA loan

Answer: (B)

A bridge loan is considered a type of temporary loan because it is specifically designed to provide immediate cash flow to borrowers while they transition between properties. Typically used in real estate transactions, a bridge loan serves as a short-term financing solution that helps borrowers "bridge" the gap between the sale of their current home and the purchase of a new one. These loans are usually for a shorter duration, often ranging from a few months to a year, and are expected to be paid off quickly once the borrower either sells their current home or secures long-term financing. In contrast, a home equity loan is a more permanent addition to a borrower's debt profile, intended for long-term use, allowing homeowners to borrow against the equity in their homes. Fixed-rate mortgages are long-term loans with a fixed interest rate over the life of the loan, commonly ranging from 15 to 30 years. FHA loans, backed by the Federal Housing Administration, are also long-term loans aimed at providing home financing options for low-to-moderate-income borrowers. These loans generally span multiple years and do not serve a temporary purpose like a bridge loan does.

A bridge loan is considered a type of temporary loan because it is specifically designed to provide immediate cash flow to borrowers while they transition between properties. Typically used in real estate transactions, a bridge loan serves as a short-term financing solution that helps borrowers "bridge" the gap between the sale of their current home and the purchase of a new one. These loans are usually for a shorter duration, often ranging from a few months to a year, and are expected to be paid off quickly once the borrower either sells their current home or secures long-term financing.

In contrast, a home equity loan is a more permanent addition to a borrower's debt profile, intended for long-term use, allowing homeowners to borrow against the equity in their homes. Fixed-rate mortgages are long-term loans with a fixed interest rate over the life of the loan, commonly ranging from 15 to 30 years. FHA loans, backed by the Federal Housing Administration, are also long-term loans aimed at providing home financing options for low-to-moderate-income borrowers. These loans generally span multiple years and do not serve a temporary purpose like a bridge loan does.