What is an Installment Loan?

An installment loan is a borrowed amount of money that must be paid back in set payments on a set schedule over a contracted period of time. 

The Details

Banks and independent lenders offer installment loans.  The amount owed in each pay period depends on the term of the loan and the amount of money that is being borrowed.  Each payment includes money that goes partly towards paying off the principal, the actual money that is borrowed, and partly towards paying off the interest.  Payments can be made in advance, but monthly payments will still remain unchanged.

What Installment Loans Are Used For

Consumers and businesses can use installment loans to get relatively large amounts of money in short periods of time.  Some installment loans can be obtained within two days of filing an application.  Many types of loans, such as mortgage loans and loans for automobile purchases, can be taken out in installment form.  People with bad credit can still obtain installment loans because most installment loans are secured (require concrete collateral) and require little documentation for approval. 
 

 


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