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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: August 10, 2022 Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation's leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Installment loans — loans that allow you to borrow money and pay it back in equal monthly payments with a fixed interest rate — are a handy personal finance tool if you’re looking to pay off sizable debts in small, manageable chunks. The most common type of installment loan is a , but other examples of installment loans include no-credit-check loans, and auto loans. What is an installment loan
Installment loans allow individuals to borrow a predetermined amount of money, disbursed in a lump sum, that can be repaid over time. Typically, these loans come with a fixed interest rate and require regular monthly payments that remain the same each month. A portion of each monthly payment is applied to the principal amount borrowed, and a portion is applied to the interest on the loan. Installment loans differ from credit cards or lines of credit, which typically have more flexible repayment terms and variable interest rates — meaning you don’t have a predictable monthly payment. With installment loans, you always know what to expect when your monthly bill is due. Types of installment loans
Installment loans come in many forms. Although they operate similarly, each type comes with different features, loan purposes and average interest rates. Personal loans
A is money provided by a lender that can be repaid in monthly installments over a fixed period at a fixed interest rate. These loans are available from online lenders, private lenders and credit unions. The proceeds from a personal loan are provided in a lump sum and can be used to fund various needs. “A personal loan can be a great financing option for consumers looking to budget a wide range of expenses from car repairs to home improvements,” says Mark Victoria, head of unsecured lending for TD Bank. “A very common and effective use of a personal loan is to consolidate higher interest credit card debt.” The repayment terms for personal loans usually range from 24 months to 60 months, but some can go as high as 72 months. Pros Cons Fixed interest rate Interest rates may be higher Fixed monthly payments Origination fees and prepayment penalties Lump sum payment Eligibility requirements Money can be used for various purposes Higher payments than credit cards No-credit-check loans
Payday lenders often provide no-credit-check loans that don’t check your credit score before lending money. are intended to help consumers during an emergency or when they don’t have another source of credit. The amount of a payday loan is smaller than a personal loan, often . Payday loans are often short-term, high-cost loans. When applying for these loans, your credit score does not matter because your paycheck is used as security against the amount borrowed. When approved for a payday loan, you plus any fees. The lender holds onto that check and gives you cash. On your next payday, the lender cashes the check you provided. If you take an online loan, you authorize the company to take the funds from your bank account on your next payday once your employer has paid you. Pros Cons No credit check High interest rates Rapid approval timeline Short repayment timeline Funds provided quickly Fees No collateral required Limited loan amount Mortgages
Another common installment loan is a . The most popular mortgages require homeowners to pay back the money borrowed over the course of 15 or 30 years with a fixed interest rate. Because a mortgage is backed by , such as a house or condo, the tend to be lower. Pros Cons Fixed interest rate Long repayment commitment Fixed monthly payment Can be harder to qualify Long repayment timeline If you fail to make payments, home can be foreclosed upon Lower interest rates When including interest over 15 to 30 years, overall cost is significant Auto loans
are another popular type of installment loan. Typically, consumers make a down payment on a car or apply the trade-in value of their existing car, then finance the purchase price balance with a car loan. Monthly payments are made to lenders until the car loan is paid in full. Pros Cons You don’t have to pay the full vehicle cost upfront Good credit score is required for the best interest rates Fixed monthly payment amount If you default, the vehicle can be repossessed Loan helps to build your credit profile