An installment loan gives you a specific amount of money upfront and requires you to repay it through scheduled payments over a defined period. Each payment typically includes part of the principal you borrowed and interest charged by the lender. Depending on the loan, payments may be monthly or follow another agreed schedule.
Personal loans, auto loans, student loans, and many business loans are examples of installment borrowing. Your payment depends mainly on the amount borrowed, interest rate, and repayment term. A longer term can make the monthly payment smaller, but you may pay more interest overall.
Before accepting an installment loan, look beyond the monthly payment. Check the annual percentage rate, fees, total repayment amount, and whether there are penalties for paying early. Using a loan payment calculator can help you see how different loan amounts and terms affect your expected payments.
