What is the difference between a mortgage and a personal loan

Throughout life, many of us will find ourselves in moments where we will need money that we do not have. Depending on the circumstances in which we are, we will agree to get one way or another, and use a type of loan agreement or another. Some ways to get this money would be by requesting a mortgage or a personal loan . Although they may be similar, in practice they are used for different situations. In .com we will help you understand what is the difference between a mortgage and a personal loan .

What is a mortgage and how does it make a difference?

A mortgage is a type of loan that is made for the purchase of a house generally, for the purchase of a commercial premises or even for the purchase of a land. It is a type of loan that usually has a very high repayment period and that can vary from just 5 years to 35 or 40 years.

These types of loans usually have an interest rate to pay fairly low, or at least significantly lower than a personal loan. This is because the mortgage guarantee clause is included in the contract, that is, you guarantee that you will return the amount with the home you have acquired, in case of insolvency.

On the other hand, a mortgage usually has other types of expenses greater than in a personal loan. These are usually derived from the same purchase of a property, such as costs of registering the property, or expenses of managing the necessary documents before a notary, among others.

What is a personal loan and how does it make a difference?

In the case of a personal loan, it can be requested for various reasons (studies, travel, household appliances, and so on) and does not usually incur excessively high amounts of money. It is usually returned within a period of less than 5 years.

Normally, the interest rate that we must pay on personal loans is usually higher than that of mortgages, since we can not guarantee them with tangible real estate. In spite of this, entities that grant personal loans usually request the existence of guarantees to make sure.

Therefore, depending on the purpose for which we allocate the money, we could be more interested in requesting a mortgage to buy a house, or a personal loan if we wish to have a magnificent summer vacation, depending on our needs.