Overview

When you need quick cash, deciding between a bridge loan and a personal line of credit matters because costs, speed, collateral, and exit plans differ. In my 15 years advising borrowers, I’ve seen each product shine in specific scenarios—bridge loans for tight real estate timing and lines of credit for ongoing, uncertain expenses.

Quick comparison

  • Term and purpose: Bridge loans are explicitly short‑term (weeks to a few years) to solve a timing gap; personal lines of credit are revolving and designed for repeated draws over months or years. (Consumer Financial Protection Bureau)
  • Collateral: Bridge loans are typically secured by property; personal lines can be unsecured or secured (e.g., savings‑backed) and often carry lower advance amounts.
  • Interest and fees: Bridge loans often carry higher rates and closing fees; personal lines charge interest only on the outstanding balance and may have membership or draw fees.
  • Repayment/Exit: Bridge loans require a clear exit (sale, refinance, or long‑term mortgage). Lines of credit require ongoing management and can be converted to a term loan by some lenders.

When to choose a bridge loan

Use a bridge loan when timing, not credit, is the key obstacle:

  • You must close on a new home before your current home sells. A bridge loan supplies funds fast against your existing equity.
  • You’re an investor or developer needing temporary capital to complete a purchase or gap finance a project before long‑term financing closes.
  • You have a clear, credible exit plan within a short period—sale proceeds, a scheduled refinance, or committed long‑term financing.

Pros

  • Fast funding and larger advance amounts relative to short‑term unsecured credit.
  • Lenders price around collateral (so strong home equity helps).

Cons

  • Higher interest rates and upfront fees; lender may require interest reserve or payments during the term.
  • Risk of carrying two mortgage payments if your sale/refinance is delayed.

When to choose a personal line of credit

Use a personal line of credit when flexibility and repeated access are priorities:

  • You need funds for ongoing or unpredictable expenses (home repairs, medical bills, seasonal cash flow, staged renovations).
  • You prefer paying interest only on what you borrow and want the option to repay and redraw.
  • Your need isn’t easily sized into a single term loan, or you want a backstop for emergencies.

Pros

  • Lower up‑front costs and interest only on used funds; unsecured options exist.
  • Greater flexibility for multiple or staggered draws.

Cons

  • Credit limits can be modest compared with equity‑backed bridge loans.
  • Variable rates and the temptation to carry revolving balances can increase total interest.

Eligibility and underwriting

  • Bridge loan underwriting focuses on property value, equity, and your exit plan. Lenders often require documentation of the intended sale or refinancing timeline.
  • Personal line approval centers on credit score, income/stability, and debt‑to‑income ratio; secured lines (e.g., a savings‑secured LOC) can be easier to obtain at lower rates.

Cost examples (typical differences)

  • Bridge loans: higher APRs and closing costs; lenders may charge origination fees, interest reserves, and prepayment or exit fees.
  • Personal lines: lower startup costs; interest accrues only on drawn balances, but look for annual fees, inactivity fees, or higher rates on unsecured lines.
    (For consumer protection and product comparisons, see the Consumer Financial Protection Bureau.)

Decision checklist: Which fits your situation?

  1. Is this a one‑time, time‑sensitive, property‑related gap? If yes, lean bridge loan.
  2. Do you need ongoing, flexible access to cash over months? If yes, consider a personal line.
  3. Can you pledge property or do you prefer unsecured credit? Property collateral favors bridge loans.
  4. Do you have a clear exit (sale/refi) within a short window? Without an exit, a bridge loan becomes risky.
  5. Compare total cost (interest, fees, closing costs) and run scenarios for delays.

Real‑world examples

  • Home purchase timing: A buyer used a bridge loan to close on a new house before selling their condo; the bridge covered the down payment and monthly costs until the condo sale funded the mortgage payoff.
  • Renovation cash flow: A homeowner opened a personal line of credit to draw as renovation milestones required funds, avoiding multiple loan applications and interest on unused cash.

How lenders expect you to exit a bridge loan

Lenders want a documented path—signed purchase contract showing the sale of your old home, a letter of intent for refinancing, or projected sale timelines for investment property. Without a credible exit, a lender may decline or charge a higher price. See related guidance on bridge loan exit strategies: Bridge Loans for Homebuyers: Timing, Costs, and Risks.

When to avoid either product

  • Avoid bridge loans if you lack equity or a reliable exit; the cost of delays can be severe.
  • Avoid a personal line if you’ll likely carry a long‑term balance without a repayment plan—high variable interest over time can erode savings.

Related resources

Practical tips from my practice

  • Always model a conservative timeline: assume your sale or refinance takes longer than expected.
  • Negotiate an interest reserve or interest‑only option when using a bridge so monthly cash flow remains manageable.
  • Compare the all‑in APR and closing costs, not just the headline rate.

FAQ (brief)

Q: Can I get a bridge loan without home equity? A: Rarely—most bridge lenders require equity or other strong collateral. (CFPB)

Q: Does a personal line of credit hurt my credit score? A: Applying triggers a hard inquiry; carrying a large balance relative to the limit can lower your score. Manage utilization and payments.

Bottom line

Choose a bridge loan when timing in a real estate transaction is the primary issue and you have a documented exit; choose a personal line of credit when you need flexible, repeatable access to cash and prefer paying interest only on what you use. For personalized advice, consult a lender or financial planner—this article is educational and not tax or investment advice.

Sources and further reading

  • Consumer Financial Protection Bureau (CFPB), consumerfinance.gov — information on loans and lines of credit.
  • Federal Reserve research on household credit and borrowing trends.

Disclaimer

This content is for educational purposes and not personalized financial advice. Consult a qualified lender, tax professional, or financial advisor about your specific situation.