Difference Between Car Loan And Mortgage

What Interest Rate Can I Afford?

There is no doubt that investing in automobiles is long term investments, which can benefit you for several years.

However, if you are planning for purchasing a brand new car but you don’t have enough money to do that, taking a loan might be a better option for you.

By getting a loan, you can get frequent funding to buy your desired car. It can be of two types; Mortgage and car loans. You can choose one of these according to your preferences. But before taking a decision, you should keep yourself fully informed about these two funding options.

Read on to understand the difference between car loan and mortgage.

What’s a MORTGAGE?

A mortgage is a loan where the property can be used as a security. The debtor enters into an agreement with the creditor (normally a bank) wherein the debtor receives money.

The debtor subsequently makes payments within a predetermined time span until he pays the total amount to the creditor.

Types of Mortgage Loans:

There are numerous types of mortgage loans and debtors should evaluate what’s the best. The kinds of loans have been distinguished by their own time duration:

  • Some institutions currently provide loans as much as 50 years.
  • Interest rates (these can be fixed or variable).
  • The number of payments per interval.

Risks Involved in Mortgage:

Though mortgage helps you make a bigger purchase, it involves some risks that you must know before getting involved in it:

Car Loan

  • There isn’t any guarantee the debtor will have the ability to pay later on.
  • A failure to pay will cause an entire reduction of the advantage.
  • Failure to repay enables a bank to lawfully foreclose and auction off the property to pay for its losses.

A car loan is also a good option if you want to own your dream car. You don’t need to use your property for security because the automobile serves as collateral for your loan.

The loan is paid back in fixed payments that are decided according to the amount of the loan. Similar to a mortgage, in case of a car loan, the creditor retains ownership of the car until the last payment is made.

Bonded Loan (Car Loan):

If the creditor has full financial control of the car, it is called a “bonded” loan. It means that the debt is termed as a lower risk and reduced interest rate to the debtor.

Interest rates can also be fixed, so borrowers aren’t exposed to the gains.

Leasing a car is another option, you can also consider it for getting your car.

The Requirements:

  • Most automobile loans have been fixed in 36, 48 or 60 months.
  • The shorter the duration, the greater the monthly payment and vice versa.


  • A lower interest rate.
  • Easier to get with poor credit rating.
  • A suitable ‘on the spot’ finance alternative.


  • You do not have title to the automobile until the final payment is made.
  • Upfront deposit is necessary to secure the loan.

Irrespective of which loan management option you choose, prices and interest rates always differ in both ways either you go for a car loan or mortgage.

So, do your homework and shop around before making a car investment.

Explore banks, credit unions, and other systems of car leasing in order to find out the interest rates and loan duration with a reasonable monthly payment.

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