Glossary
Bridge loan
A short-term loan that "bridges" a gap — most often financing a new home purchase before your current home sells.
A bridge loan lets you tap equity in a home you haven't sold yet to buy a new one, avoiding a contingent offer or a rushed sale. Terms are typically 6–12 months, rates run higher than a standard mortgage, and the loan is usually repaid in full once the original home sells. Businesses use the same concept to cover a cash-flow gap before a larger financing round or invoice payment lands — the structure is short, expensive, and purpose-built to be temporary.
Related terms
- Credit score A 300–850 number summarizing your credit risk. It is the single biggest lever on the rate a lender offers you.
- Reverse mortgage A loan for homeowners 62+ that pays you from your home equity instead of the other way around — repaid when you sell, move out, or pass away.
- Balloon payment A large lump sum due at the end of a loan term, after years of smaller payments that didn't fully pay off the balance.
- Prepayment penalty A fee some lenders charge for paying a loan off early. Rare on consumer loans, common in commercial lending — always check the note.
- FICO score The most widely used credit-scoring model among lenders, built by Fair Isaac Corporation — often used interchangeably with "credit score," though VantageScore is a common alternative.
- Amortization The schedule that splits each payment between interest and principal. Early payments are mostly interest; the balance flips near the end of the term.