A loan and a mortgage are both types of borrowing, but they have some differences:
Purpose: A loan can be used for any purpose, such as paying for a car, home improvements, or consolidating debt. A mortgage, on the other hand, is specifically used for purchasing a property.
Collateral: A loan can be secured or unsecured. An unsecured loan does not require any collateral, while a secured loan requires collateral, such as a car or a house. A mortgage is always a secured loan, where the collateral is the property that is being purchased.
Interest rates: The interest rate for a loan can be fixed or variable and is based on various factors, such as credit score and loan term. The interest rate for a mortgage is typically lower than a loan, and can also be fixed or variable, but is primarily based on the property value, down payment, and credit score.
Repayment terms: Loans are typically repaid over a shorter term, ranging from a few months to a few years. Mortgages, on the other hand, are repaid over a much longer term, usually 15 to 30 years.
Amount borrowed: Loans are typically for smaller amounts of money, ranging from a few hundred dollars to tens of thousands of dollars. Mortgages are generally for much larger amounts, often hundreds of thousands of dollars.
In summary, while both loans and mortgages involve borrowing money, they differ in purpose, collateral, interest rates, repayment terms, and amount borrowed