When it comes to borrowing money, two common terms that often cause confusion are mortgage and loan. To clarify, a loan is a broad term encompassing any borrowed sum of money that is repaid over time with interest. This can include anything from personal loans to car loans and student loans. On the other hand, a mortgage is a specific type of loan that is used solely for purchasing real estate or property.
The key difference between the two lies in their purpose. Loans can be for various purposes, such as paying for education, buying a car, or consolidating debt. In these cases, the borrowed money is not tied to a specific asset. Conversely, a mortgage is a secured loan where the property itself serves as collateral. This means that if the borrower fails to repay the mortgage, the lender has the right to foreclose on the property to recover the outstanding amount.
In summary, while both mortgages and loans involve borrowing money that must be repaid, the distinction lies in purpose and collateral. Loans are general in nature, covering a wide range of borrowing needs, while a mortgage is a specific type of loan used solely for real estate purchases with the property acting as collateral.
(Response: The difference between a mortgage and a loan lies in their purpose and collateral. A loan is a broad term for any borrowed sum of money repaid over time, while a mortgage is a specific type of loan used solely for purchasing real estate, where the property itself serves as collateral.)