Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

A loan to an individual to purchase a home is classified as a real estate loan. This type of loan is specifically designed for the purpose of financing the purchase of residential property. Real estate loans can encompass various forms of lending, including mortgages, which are secured by the property being purchased.

This classification is critical because real estate loans often have specific terms and conditions distinct from other types of loans. For instance, they typically involve longer repayment periods, and the property itself serves as collateral, which can affect the interest rate and qualification requirements.

On the other hand, consumer loans generally refer to unsecured lending for personal or household use but do not specifically cover real estate investments. Commercial loans are intended for business purposes, while agricultural loans pertain specifically to farming and agricultural needs. Thus, when an individual seeks financing solely for home purchase, real estate loan is the accurate designation.