People's life is often accompanied by appeals to the bank in order to obtain a loan for the purchase of real estate or the realization of a dream. Among banking services, standard loans and mortgages are far from the last places. At the same time, not everyone knows how these two concepts differ.
Features of the loan
A loan is understood as a form of relationship characterized by the transfer by the rightholder of the available free value to another entity. In other words, the creditor, in the presence of material resources or goods, can transfer them to a person in need, but subject to repayment, payment and urgency. According to the terms of the loan agreement, the borrower is obliged to repay the loan in full within the specified time frame by paying a certain percentage for using it. Most often, money is transferred on credit. Moreover, these operations in most cases are carried out by banks, although they can also arise between non-credit organizations.
Features of the mortgage
A mortgage is considered a certain form of lending. At the same time, money is most often issued for the purchase of housing or a land plot, although in some cases the borrower can spend it at his own discretion. The property being purchased acts as collateral. This moment is recorded in the certificate of ownership. The property is in this status for the entire crediting period. It is a kind of guarantee of the client's solvency. In the event of financial difficulties that interfere with the fulfillment of payment obligations, the property can be sold, and part of the proceeds will go to pay off the mortgage.
The main differences between a loan and a mortgage
From the above, it becomes clear that a loan is a broader concept than a mortgage. The second is a variation of the first. The loan is provided to the borrower for temporary use, subject to full repayment for various purposes and can be associated with both finances and certain goods or items. At the same time, it can be either with or without collateral, but in any case, the borrower is obliged to pay the percentage specified in the contract. A mortgage is a loan for the purchase of real estate. Purchased housing is required as collateral. In addition, a mortgage is exclusively a banking service, and a loan can also be issued by business entities.
Certain differences between a loan and a mortgage are in the interest rate and the timing of the loan. In the first case, the term rarely exceeds 5 years, in the second, it can reach 30 years. Moreover, when providing a mortgage, the interest rate is lower than with conventional lending. This is due to the lower risks of the bank.
