How Loans and Mortgages Work

Understanding your loan and mortgage options. A financial professional guides clients through paperwork, making complex decisions clear and approachable.

When you want to buy something big—like a car or a house—but don't have all the money right now, you can get a loan.

Think of a loan as simply borrowing money. A lender (like a bank) gives you a big chunk of cash today, and you promise to pay that money back over time. Car payments are a perfect example of this.

What is a Mortgage?

A mortgage is just the fancy name for a loan used specifically to buy a house or property.

What Happens If You Don't Pay?

Just like with a car loan, the loan agreement lets you legally own the item (the house or the car). But it also has a catch: The lender uses that item as collateral. This means if you stop making your payments, the lender has the right to take the item back and sell it to get their money back. (For a house, this is a complex process called foreclosure.)

Why Do Lenders Offer Loans?

Lenders aren't giving away money for free! They make a profit by charging interest.

Interest is just extra money you pay back on top of the amount you borrowed. This is how the lender earns money for letting you use their cash.

There are rare cases, like some 0% car loans, where the interest isn't obvious. But even then, you usually give up a discount (like cash back) to get the 0% rate, so you're still paying a cost upfront to borrow the money.