Types of loan

Types

[edit] Secured
A mortgage is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured on the car, in much the same way as a mortgage above, although the duration of the loan period is considerably shorter, quite often corresponding to the useful life of the car. Where this is not, it will be another form of consumer credit.

[edit] Unsecured
These may be available from financial institutions under many different guises or marketing packages:
credit card debt,
personal loans,
bank overdrafts
credit facilities or lines of credit
corporate bonds
The interest rates applicable to these different forms may vary depending on the lender, the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.