What Is an Installment Loan?
An installment loan is a loan repaid through a fixed number of scheduled payments, usually monthly, over a set term. Mortgages, auto loans, student loans, and most personal loans are installment loans. Each payment typically covers interest plus part of the principal until the balance reaches zero.
Installment vs. Revolving Credit
Revolving credit, such as a credit card, lets you borrow repeatedly up to a limit with varying payments. An installment loan provides a lump sum once and is repaid on a set schedule.
Amortization
With fixed payments, the share going to interest is highest at the start and falls over time, as shown in an amortization schedule.
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🔗 Related Terms
More Loans & Credit Terms
- APR (Annual Percentage Rate)
- Auto Loan
- Balance Transfer
- Balloon Payment
- Buy Now, Pay Later (BNPL)
- Cash Advance
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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.