Mortgage vs. Financing

Difference Between Mortgage And Financing


The financing is the loan of a sum of money authorized by financial intermediaries (agencies, such as financial companies, or banks) which has to be returned together with the interest.  The amount which has to be paid and then returned back is agreed upon at the time of contract. The two figures involved in the loan agreement are:

– The debtor: That is the one who takes the loan.

– The creditor:  That is the one who provides the loan.

The funding can be done on 2 categories:

1. Personal finance: It is issued to an individual on the basis of the salary he receives. Personal finance can range from petty cash (A television) to large purchases (A car) and is returned in installments. According to the law on consumer credit the limit of the personal finance is 31,000€ and need not provide any information about the use of the finance. The characteristic of this funding is not the motivation but the mode of the request for the reimbursement. This is done by holding a figure directly on the salary which can reach up to a maximum of a fifth of the salary received.

2. Trust funding: It is characterized, as the term suggests, by trust to be given to the debtor because guarantees may not be sufficient to cover all debt. The supporting documentation used to determine if the person is worthy of trust not can be given.  These documents include certificate of income, salary, pension etc.


Mortgage is a guarantee for the return of the loan. Mortgage is a property which guarantees the creditors that the debtor will return the loan amount. If he fails to do so, the property mortgaged by the debtor is used to pay the loan. The amortization schedule shows the number and distribution. The amount of the rate is expressed in respect of each installment and the amount of interest in the share of the loan that is going to reimburse with that particular installment. Initially, the rate goes to cover for much of the interest expense and a small part of the capital going to reverse as the proportion.

For example, the debt is 1000€ plus interest 100€ for a total of 1100€. On a theoretical division in 10 installments of € 110 each the first installment may have a division like this:

40€ share capital and 60€ of interest (for a total of just 110€)

While the final installment could be so composed

109€ share capital and 1€ of interest (for a total of just 110€)

So the value of the installment does not change but changes what you are repaying. This solution guarantees the creditor if the debts were not refunded in full, he will not lose the interests (Acquired with the prime rate) or the capital (Recoverable with the mortgage).


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