Loan vs Mortgage, here are what you need to know about these two topics under finance. Many tend to confuse themselves with the difference and similarities between a loan and a mortgage. A loan is referred to as the amount of money a borrower receive from a lender to finance several monetary activities. On the other hand, a Mortgage can also be known as collateral, a borrower uses an asset to secure a loan to serve as security. You only get the asset back after you have repaid your mortgage loan in full.
Anyone who needs an emergency or quick cash to settle bills and other monetary situation can apply for a loan. Mortgage is secured loans for persons who want to own a house or refinance the purchase of a house. Mortgage is a type of loan for borrowers who want to be homeowners or own a property but have the necessary capital to do so.
There are many types of loans offered by lenders and mortgage or home loan is one of them. Under mortgage or home loan, there are also types borrowers have to choose from. When it comes to loan vs mortgage, their requirements and eligibilities are different. Mortgage loans require downpayment and sometimes origination fee. Downpayment is calculated as a percentage of the price of the house you want to buy. The origination fee is demanded to process your loan, either added or subtracted from the principal amount.
Types of Loans
There are different loans offered by financial institutions and online lenders. Some of these loans include;
- Personal loan – loans received for taking care of personal expenses like home bills, hospital bills and others.
- Auto loans – loans for purchasing a used or new car or refinancing the purchase of a vehicle.
- Student loans – loans offered by the federal government to student and parents for financing one’s education.
- Mortgage loans – loans for the purchase of a house.
- Payday loans – short-term loans for covering expenses until you pay off on your next payday.
- Others – Home Equity loans, Credit-builder loans, Debit consolidation loans, Small business loans, Title loans, Pawnshop loans, Boat loans, RV loans, Family loans, Land loans and Pool loans.
Types of Mortgage loans
Let’s take a look at the types of loans.
- Conventional loans
- Fixed-rate mortgages
- Adjustable-rate mortgages
- FHA loans (Federal Housing Administration)
- USDA loans (United States Department of Agricuture)
- VA loans (Department of Veterans Affairs)
- Jumbo loans
Similarities on Loan vs Mortgage
Aside their differences, a loan and a mortgage have many factors in common. When it comes to these two topics, there are two, three or more parties involved, thus a lender, borrower, and a co-signer, co-borrower. The lender gives the loan, the borrower receive the loan, the co-signer help a borrower with low or no credit history sign a loan agreement and a co-borrower partners with the another borrower to apply for a loan. Also, they have APR, Interest rate and loan terms.