Mortgage
Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Class 10, Ch 3 "Money and Credit"
Meaning
A mortgage is the use of immovable property, such as land or a house, as security for a loan. The borrower keeps using the property. But if the loan is not repaid, the lender has the right to take the property or sell it to recover the money. Mortgages let banks lend large sums for long periods. The poor usually own no such property, which keeps many of them out of formal credit.
Example
A farmer borrows from a land development bank (now called a SCARDB or PCARDB) for a long-term investment and pledges their land as a mortgage. If they default, the bank can sell the land.
Don't confuse with
- Collateral: the broader term for any asset used as a guarantee, including a vehicle, livestock or bank deposits. A mortgage is collateral in the form of immovable property.
- Housing loan: the loan itself. A mortgage is only the security behind it.