What type of loan uses property as security to ensure repayment?

A mortgage is a specific type of loan that uses property, typically real estate, as collateral to secure the loan. This means that the lender has a legal claim to the property if the borrower fails to repay the loan as agreed. Mortgages are commonly used to finance the purchase of a home, allowing individuals to spread the cost of buying property over a long period.

In contrast to this, a home equity loan is similar but specifically allows homeowners to borrow against the equity they have built up in their property. However, the term 'mortgage' is more broadly understood as the original loan taken out to purchase a property.

Personal loans do not utilize property as security; instead, they are typically unsecured, meaning they rely solely on the borrower's creditworthiness without collateral backing. Unsecured loans also do not use any property as security, which further emphasizes the distinction between them and secured loans like mortgages.

This security mechanism offered by a mortgage gives lenders a higher level of confidence in the repayment of the loan, thereby often allowing borrowers to secure lower interest rates compared to other types of unsecured loans.