An installment loan is a loan repaid in a series of scheduled payments over a set term rather than all at once. Each installment covers part of the interest and part of the principal borrowed.
An installment loan is funded as a single amount up front and repaid through regular installments, often weekly, biweekly, or monthly, until the balance reaches zero at the end of the term. Because the payment amount and the schedule are set when the loan is signed, you know the amount due and the dates in advance. This structure contrasts with a single lump sum due on one date, which is how a payday loan is typically structured, and with revolving credit, which has no fixed payoff date. Personal loans, auto loans, mortgages, and student loans are common forms of installment credit. The total cost depends on the principal, the interest rate, any fees, and the length of the term.
