What Is The Difference Between A Loan And A Mortgage?
Loan and mortgage are two different terms in the world of finance. In this article, you will get to know the significant between these two financial terms.
The cost of item also contributes to why we need to have a lot of money and why someone would go for a loan or rely on mortgage.
When we talk of a loan, it is an amount of money that is borrowed from a financial institute. This money borrowed may be secured or collateral-free depending on the financial institution it is being borrowed from.
On the other hand, a mortgage is a type of loan that any immovable property is used as a collateral when requesting for a from a financial institute.
However, borrowers are able to regain ownership of their properties after thy have made full payment.
What Are The Types Of Loan And Mortgage?
When we talk of loan, it can be taken for personal reason or business purpose. It can also be secured or unsecured. A loan is supposed to be paid back within a specific period of time with a fixed amount as an interest.
A mortgage is also used to purchase or refinance a new home or property when the borrower does not have the money upfront. In this case, the lender also obtains an appraisal to determine the value of the property. This is to determine the amount the financial institution can give out.
Here are some of the types of loans and their uses;
- Secured loan: They are usually used for the purchase of properties such as vehicles and houses.
- Unsecured loan: This type of loan is also used for a variety purchase which includes repayment of debt and bedroom remodeling among others.
- Student loan: This is usually taken by students to help in taking care of their educational needs. This type of loan also comes with a set of repayment terms.
- Revolving loan: Similarly, this kind of loan comes in the form of credit card and lines of cards. However, the card can be used over and over once the borrower repays on time.
There are also loans that tertiary students can apply and sponsor their education