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How are mortgage and auto loans similar?
The item purchased is used as collateral. If you take out a loan on a mortgage or a car and you do not make the appropriate payments, you are subject to losing the item because the borrows use them as collateral. Collateral is another word for security which is what insures the lenders they will not lose everything if the borrow fails to make their payments and hold their commitments.
The mortgage and auto loans are similar due to their stipulated norm of "items purchased being used as collateral." So, option (D) or (iv) is the correct answer.
What are the similarities and differences between a mortgage and an auto loan?
The item purchased is utilized as a security deposit. If you take out a loan for a house or a car and do not make the required payments, you risk losing the item because it is used as collateral by the lenders.
Collateral is another synonym for security, and it protects lenders by ensuring that they will not lose everything if the borrower defaults on their payments and promises.
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