What is a Bridge Loan?

It’s an unfortunate fact that the move to assisted living for a senior is often unexpected or sudden; consequently, there’s often an immediate and urgent need to access funds to pay for the expenses involved in the transition (including moving costs and “move in” costs that can add up quite rapidly).

If your loved one has not fully planned or prepared for moving into an assisted living community, you and your family may be faced with the sudden need to access thousands of dollars quickly, at least while other solutions are being pursued. Recent studies show that the national median monthly rate for a one-bedroom unit in an assisted living facility is $3,500, while the typical assisted living resident has an income of about $19,000 per year. Often selling the family home or VA benefits can help cover this gap, but both of these endeavors can take months before funds are acquired.

How a Bridge Loan Can Help

One potential solution to pay for needed services in the meantime is a bridge loan for senior living costs. Similar to the bridge loans some homeowners take on when purchasing a new home while selling a previous home, a bridge loan can help cover the gap in funds for a short time. When acquired to help pay for assisted living, the main condition is the agreement that the full loan will be repaid as soon as the other funding sources are achieved.

An added benefit for this type of bridge loan is that it can sometimes be split between up to six applicants, (as with the Elderlife Line of Credit), allowing a family to share the payments until the loan can be repaid. These types of loans are unsecured, meaning you do not need to have a car or home as collateral. Also, the loans can be quickly approved, in as little as two days, helping ensure the safety of the senior who has moved to assisted living.  In addition, while the overall interest rates are considered a bit higher than average, the monthly payments are considerably lower (they do rise as the interest accrues on the loan balance) and there is often no penalty for paying off the loan early.

Bridge Loans vs. Reverse Mortgages

Unlike a reverse mortgage, which experts say is beneficial for longer-term care (5+ years), a bridge loan is helpful for shorter time frames (1-18 months). The funds from the loan go directly to the assisted living facility (not to the borrowers), but can buy time to allow the family to make needed repairs or updates to the home before selling it, or to work through the paperwork involved in accessing government benefits (a process which can take more than a year). In addition, if the senior’s life expectancy is considerably shorter, a bridge loan might be the smartest option to keep your loved one comfortable and well cared for, since reports say skilled nursing can cost up to $6,000 a month.

When applying for any loan, it’s imperative to read and review carefully. These types of bridge loans often do involve specific questions about the type of care the applicant is seeking, how they intend to pay for care long term, and about their current situation (where the applicant is in the process of securing the long-term funds). Bridge loans can be a lifeline to family members working hard to get their loved one set up in a good assisted living situation; this can already be a difficult time, and wondering where you’ll come up with the money needed makes things even more stressful. Consider learning more about bridge loans to see if that might help your family while to arrange for longer-term plans.

Megan Hammons

Megan Hammons lives in the Central Texas countryside just outside of Austin, pursuing her love for copywriting after a career in high-tech marketing. She is part of a large, diverse family and enjoys spending time with the multiple generations living in her community.