Wednesday, July 12, 2017

What is an Installment Loan and How Exactly Do They Work?

When you need to make a large purchase, such as a house or a car, you often take out an installment loan to do it. Student loans also are installment loans, as are personal loans. Here is a rundown of what an installment loan is and how it works.

Specific Amount

One of the hallmarks of an installment loan is that you borrow a specific amount one time. This can be $200,000 for a house, $20,000 for a car or $2,000 for personal use. 

Installment loan amounts can vary greatly, but they all have one thing in common: Once you have agreed on an amount and signed the papers with your lender, the amount is set, and the only way to change it is to take out a new loan.

Set Payment Schedule

Perhaps the thing that defines installment loans more than any other factor is the set payment schedule. 
With an installment loan, you pay a set amount each month for a predetermined amount of time. 

If you have a mortgage, your term is often 15 or 30 years. With a car loan, it might be five years. Personal loans may be only one or two years. 

Secured VS Unsecured

Installment loans can be either secured or unsecured. A secured loan is a loan in which the asset for which the loan was issued acts as collateral, meaning it can be foreclosed on and repossessed if you don't make the payments. 

Home and car loans are examples of secured installment loans. An unsecured loan is a loan with no collateral backing it, meaning the only recourse the lender has for nonpayment of the loan is to sue the borrower. 

Some companies, like Las Vegas Finance, know that personal loans and student loans are examples of unsecured installment loans.


Most installment loans are amortized, meaning that while you make the same payment every month, the portion of the payment going to principal and interest changes. 

With most installment loans, most of your early payments go toward paying the interest on the loan and very little goes toward the principal. In the latter stages of the loan, that ratio flips. 

If your installment loan allows you to make extra payments or pay off the loan in full early, you can save money on interest costs by doing so.

It's likely you will take out an installment loan at some point in your life. Knowing what they are and how they work will help you make better decisions regarding the loans.


  1. The quality of your articles and listing is really attractive.

  2. it is wise to choice to select Light Emitting Diode christmas lights becaue they are not fire hazard’ Best California mortgage company

  3. Your credit limit is the amount you have been authorised to spend on your credit card. It is set by your lender and dictates how much debt you can build up. Hitachi Credit Mortgages

  4. If you demonstrate that you’re a responsible credit card user, and use the card enough to warrant a credit limit increase, you could get a higher credit line as frequently as every 6 or 12 months. Know more by visiting Ravenwood Services

  5. I really want to thank the author for such a nice blog that helped me to understand why it is important. Loan Scam

  6. You have a genuine capacity to compose a substance that is useful for us. You have shared an amazing post about short term loans online .Much obliged to you for your endeavors in sharing such information with us.

  7. Extremely useful information which you have shared here about cash loans near me. This is a great way to enhance knowledge for us, and also beneficial for us. Thank you for sharing an article like this.

  8. Secured bad credit-credit cards are the step down from the unsecured cards. namsocredit are easier to get approved for, but they also require you to "secure" them. Secure cards have been around for a while and are not likely to go extinct anytime soon.

  9. As far as the bank is concerned, a bank which is liable for merchant processing with Visa or Mastercard can be a big help as your merchant account provider. Selling Merchant Services

  10. I generally want quality content and this thing I found in your article. It is beneficial and significant for us. Keep sharing these kinds of articles, Thank you.guaranteed loan approval alberta

  11. You have done great work by publishing this article here. It is useful and convenient info for us. Keep upgrading our knowledge by share these types of articles.Easy Small Business Loans

  12. I always check this type of advisory post and I found your article which is related to my interest. This is a great way to increase knowledge for us. Thanks for sharing an article like this.Finance Recovery Services

  13. This article you've just presented is appealing. I'd like to learn more about these types of blogs. Thank you so much for sharing this blog. Credit Card Debt

  14. This article is fantastic. It was enjoyable to read this material. We offer all kinds of advice. Never stop posting. online security banking You have my sincere gratitude.


Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics