What is an installment loan?

An installment loan is defined as a loan that is repaid over a specified period of time through scheduled payments. These payments, which typically include both principal and interest, are made at regular intervals, such as monthly or biweekly. This structure allows borrowers to understand their repayment obligations clearly, as they can anticipate the amount due at each scheduled payment date.

The nature of installment loans is such that they often have a fixed term, meaning the total duration of the loan is agreed upon upfront. This could range from a few months to several years, depending on the type of loan. This contrast with other loan types, especially revolving credit, where the borrowing limit and payment amounts can fluctuate.

In summary, installment loans provide a predictable repayment process, which many borrowers find beneficial for budgeting and financial planning.