An installment loan is ways to borrow funds, typically for an individual big purchase such as a vehicle

Household or university training. The borrower receives a lump sum and repays the loan over a set term in monthly payments, or installments after getting approved by a lender.

Installment loans work differently than revolving credit, such as for example bank cards, which offer a personal line of credit to constantly borrow from as opposed to an amount that is single repay. Revolving credit permits the cash to be borrowed once more as soon as it’s paid, whereas an installment loan account is closed as soon as it’s repaid.

You need to know about what they are and how they work if you’re considering taking out an installment loan, here’s what.

Kinds of Installment Loans

Installment loans can be bought in two categories that are main secured and unsecured.

A secured loan requires collateral—someone’s asset or property—as safety against the mortgage.