Key TakeawaysInstallment loans are personal or commercial loans that borrowers must repay with regularly scheduled payments or installments.For each installment payment,the borrower repays a portion of the principal borrowed and also pays interest on the loan.Examples of installment loans include auto loans,mortgage loans,personal loans,and student loans.鏇村缁撴灉…
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What is the difference between an installment loan&a mortgage?
Installment loans may be either collateralized or non-collateralized. Mortgage loans are collateralized with the house the loan is being used to purchase, and the collateral for an auto loan is the vehicle being purchased with the loan. Some installment loans, often referred to as personal loans, are extended without collateral being required.
What is an installment payment?
Payments are typically monthly, but schedules can vary. The term of the loan is the amount of time a borrower has to repay a loan. For instance, a 72-month term would allow repayment over six years. Each payment is known as an installment, which is why it鈥檚 called an installment loan.
What is an example of an installment loan?
For each installment payment, the borrower repays a portion of the principal borrowed and also pays interest on the loan. Examples of installment loans include auto loans, mortgage loans, personal loans, and student loans. The advantages of installment loans include flexible terms and lower interest rates.
What are the advantages of an installment loan?
Predictable monthly payments: If you鈥檙e on a tight budget, knowing you鈥檒l owe the same amount each month can help you plan out spending. Since installment loans are made using a set term, such as two years or five years, you also know when you鈥檒l be done paying them off. Fixed interest rate: Many installment loans have fixed interest rates.