Definition

Noun: A type of loan where the borrowed amount, plus interest, is repaid through a series of scheduled, equal payments over a fixed period.

Usage

An "installment loan" is a formal financial agreement. The key characteristic is the structured repayment plan, which divides the total debt (principal and interest) into regular, fixed payments, typically monthly. This structure provides predictability for the borrower's budget.

Examples

• She took out an installment loan to finance her new car.
• The bank offers installment loans with repayment terms ranging from 12 to 60 months.
• Compared to a credit card, an installment loan usually has a fixed interest rate and a set end date for repayment.

Advanced Usage

• Secured vs. Unsecured: An installment loan can be secured (backed by collateral like a house or car) or unsecured (based on creditworthiness).
  • Example: A mortgage is a secured installment loan, while a personal loan is often unsecured.
• Amortization: This is the process by which loan payments are applied to both principal and interest over time, which is the standard structure for an installment loan.

Variants and Related Words

• Installment (noun): One of the regular, partial payments made to repay a debt.
  • Example: The final installment on the loan is due in June.
• Installment Plan (noun): A payment method, often for a purchase, that functions like an installment loan, allowing a buyer to pay in parts.
  • Example: They bought the furniture on an installment plan.
• Term Loan: A synonym often used in business contexts for an installment loan with a specific maturity date.

Synonyms

• Amortized loan
• Term loan

Antonyms

• Revolving credit (e.g., credit card)
• Balloon loan (where a large final payment is due)
• Interest-only loan

Noun

1. a loan repaid with interest in equal periodic payments