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Simple English definitions for legal terms
conventional loan
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A quick definition of conventional loan:
A conventional loan is a type of mortgage that a person gets from a bank or other financial institution. It's not backed by the government like some other types of loans. When someone gets a conventional loan, they transfer the title or lien of their property to the lender as security for the loan. They make regular payments of both principal and interest until the loan is paid off. This type of loan is often used for buying a home.A more thorough explanation:
A conventional loan is a type of mortgage that is not backed by government insurance. In this type of loan, the borrower transfers a lien or title to the lending bank or other financial institution. These mortgages typically feature a fixed periodic payment of principal and interest throughout the mortgage term and are commonly used for home financing.
Example: John wants to buy a house and applies for a conventional loan from a bank. The bank approves his loan and transfers the title of the property to John. John will make fixed monthly payments of principal and interest to the bank until the loan is fully paid off.
This example illustrates how a conventional loan works. The borrower receives a loan from a bank or financial institution and transfers the title of the property to the lender as collateral. The borrower then makes fixed monthly payments until the loan is fully paid off.