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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.
Can an installment loan help your credit?
Using installment loans can help your credit. A healthy mix of different types of debt tends to lead to the highest credit scores, and installment loans should be part of that mix. These loans suggest that you鈥檙e a savvy borrower; if you fund everything with credit cards you鈥檙e probably paying too much.