Oftentimes, mortgages and loans are used conversely, ie, one for another. They are, however, not the same. While a loan may be collected for personal or business purposes, a mortgage is basically collected on the basis of property acquisition .

In view of this, we will be looking at the similarities and differences between a loan and a mortgage.



There are a number of similarities between loans and mortgages.


Both loans and mortgages involve money (directly or indirectly)

While loans directly involve borrowing money from a lender, mortgages involve borrowing money from a lender indirectly by asking the lender to pay for a property while you pay back.


Both loans and mortgages require payments in instalments.

At an agreed date and amount, both loans and mortgages require payments in instalments.


 Both loans and mortgages require collateral

In the case where there is a breach in agreement by the borrower, the lender requires a collateral to hold on to.


Both loans and mortgages require an interest rate

The lender’s gain is the interest from what was borrowed. Hence, interest rates are given to the borrowers.



Just as there are similarities, there are also a number of differences between loans and mortgages.

Loans are attached to an exorbitant interest rate while the interest rate attached to a mortgage is usually lesser

Mortgages have lesser interest rates than loans because the collateral used in a mortgage is of a higher value than the one used in loans. This gives the lender the assurance that a mortgagor will pay back.


While a mortgage must be backed up by a collateral, a loan may or may not be backed up

Not all loans require collateral. The need for a collateral in a loan depends on the lender, the amount to be lent and the purpose of lending. A mortgage on the other hand, requires the property acquired as the collateral.


The collateral collected in a mortgage is higher in value than the one collected in a loan

This is because a mortgage is of a higher significance than a loan. In the case where a mortgagor misses mortgage payment often, the mortgage lender confiscates the property. Hence, the need for a higher valued collateral.


Mortgages require more rigorous measures than loans which require little measures

Due to the importance attached to mortgages, it requires lots of procedures and processes. Loans on the other hand, do not require so much.


There’s lots of paperwork and document needed for a mortgage to be granted while a loan requires little or no paperwork

Before a mortgage can be granted, there’s a lot of documents to be signed, paperworks to be made. This is not the same with loans as it is straightforward.


Mortgage repayment period takes more time than a loan repayment period

A huge amount of money is being paid in mortgages, hence, the reason for a longer repayment period.


A loan repayment can be flexible while a mortgage repayment is compulsive when due

A mortgage requires a strict payment method unlike a loan which can be made flexible as agreed by the debtor and creditor.


A mortgage requires an advance payment while the advance payment of a loan depends on the lender

Before a mortgage is issued, a down payment must be made to signify an agreement while an advance payment on a loan depends on the agreement between the lender and borrower.


In the United States and other countries around the world, loans and mortgages have helped people who wish to start a business and own a property respectively.

As discussed above, there are certain terms that are common with both as well as terms that differentiates them. Overall, you may choose the one that matches your purpose.


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