Mortgages: A mortgage is a type of loan specifically used to purchase real estate, typically a home. When you take out a mortgage, you borrow money from a lender, usually a bank or a mortgage company, to buy a property. The property itself serves as collateral for the loan. Mortgages typically have a fixed or adjustable interest rate and a set repayment term, such as 15, 20, or 30 years. The borrower (mortgagor) makes regular payments to the lender (mortgagee) over the term of the loan until the full amount, including interest, is repaid. If the borrower fails to make payments, the lender has the right to foreclose on the property, meaning they can take possession of it to recover their losses.
Lending: Lending refers to the act of providing funds to individuals, businesses, or other entities with the expectation that the borrowed amount will be repaid with interest. Lending can take various forms, including:
- Personal loans: Loans provided to individuals for personal use, such as paying for a wedding, home improvements, or consolidating debt.
- Business loans: Funds provided to businesses to finance operations, expansion, or other business needs.
- Auto loans: Loans used to purchase vehicles, with the vehicle serving as collateral for the loan.
- Student loans: Loans used to finance education expenses, such as tuition, books, and living expenses, typically with deferred repayment until after graduation.
- Credit cards: Revolving lines of credit that allow cardholders to borrow money up to a certain limit, with interest charged on any outstanding balances.