An installment loan is a loan in which there are a set number of scheduled payments over time. Many different types of loans are installment loans, including mortgages and auto loans. A credit card may require a monthly minimum payment but it is not an installment loan.
Let’s say John wants to borrow $1,000 for an emergency home repair. John takes out an installment loan that requires him to pay the amount back in 24 months at a 25% interest rate. In an installment loan, John would get a check for $1,000 and then pay regular monthly payments of $53.37 for 24 months.
In general, payday loans are for a shorter duration, have a higher interest rate, and are often paid back in a single lump sum payment on the borrower’s next payday. In contrast, an installment loan can last for many months and payments are evenly spread out over the term of the loan.
Installment loans can be used to help build credit for people with bad credit, poor credit or no credit history. Since installment loans require multiple payments over time, they may help create a history of repayment. At Avant, payment history is reported back to credit reporting agencies and may help improve a credit score if a borrower makes timely payments.
At Avant, we provide access to personal loans. Loans have terms that range from 24 months to 60 months.**