Is a Personal Loan an Installment Loan?
Summary
Its important to understand how this type of loan works & how it differs from other forms of financing like revolving credit. Here’s a simple explanation.
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If you’ve been looking into loan and financing options, you’ve probably seen the term “installment loan” among the borrowing choices available to you. It’s important to understand how this type of loan works and how it differs from other forms of financing like revolving credit. Here’s a simple explanation:
What is an installment loan?
An installment loan allows you to borrow a specific amount of money with a set amount of time to repay it. The loan can have a fixed rate, which won’t change over the term of your loan, or a variable rate, which may rise or fall during the loan term.
What’s the difference between a personal loan and an installment loan?
A personal loan is a type of installment loan. They are used to consolidate debt, pay for large purchases or cover unexpected expenses like car repairs, medical bills or home repairs. With a personal loan, you borrow a lump sum at once and repay the loan over time in regular, fixed installments. There is a set payoff schedule and a definite end date.
This type of financing is very different from revolving credit, which allows you to borrow money on a repeated basis up to a set limit. Revolving credit is open-ended, meaning there are no set payment installments or payoff date.
Is an auto loan installment or revolving?
Auto loans are a popular type of installment loan. Most lenders offer auto loans with fixed payments for terms ranging from 12 to 96 months. As long as you make your full scheduled payment installments on time, your car loan is paid in full at the end of your term.
Is a credit card installment or revolving?
Credit cards and lines of credit are considered revolving credit. You get a credit limit and can borrow as often as you’d like up to that limit. The amount you’ll pay each month may change, depending on how much of your available credit you use. As you use the credit, the amount of money available to you decreases. As you repay it, your available credit increases.
Is an installment loan right for you?
Installment loans are used to meet specific financial needs. For debt consolidation, major purchases and unexpected expenses, a personal loan with fixed installments could give you the money you need with a repayment schedule that fits your financial situation.
This article is for general education and informational purposes, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any purpose and is not intended to be and does not constitute financial, legal, tax, or any other advice. Parties (other than sponsored partners of OneMain Financial (OMF)) referenced in the article are not sponsors of, do not endorse, and are not otherwise affiliated with OMF.
