Installment loans, explained

What an installment loan is

The Consumer Financial Protection Bureau describes an installment loan as a loan you repay over time with a set number of scheduled payments. Personal loans, auto loans and many small-dollar loans work this way.

• One lump sum

  The lender pays out the full amount at the start, usually by deposit to your bank account.

• Fixed schedule

  You know the payment amount and the number of payments before you sign.

• Clear end date

  Once the last payment is made, the loan is paid off. It doesn’t roll over like a credit card balance.

• Cost disclosed up front

  Lenders must show the APR, finance charge and total of payments before you accept.

Sources: What is a personal installment loan?; What is the difference between a loan’s interest rate and its APR?

How the payments work

Each payment covers part of the amount you borrowed (the principal) and the interest for that period. Early in the loan, more of each payment goes to interest; later, more goes to principal. Paying extra, or paying off early, usually lowers the total interest, unless the agreement charges a prepayment penalty.

Source: What is the difference between a loan’s interest rate and its APR?

Estimate your payment

Try different amounts, rates and terms to see how they change the monthly payment and the total you’d repay.

How it compares with other options

If you need a specific item from a store, a lease may work. If you need money for a bill, a cash loan is the type of product that fits. See how a lease differs from a loan.

Sources: What is a personal installment loan?; Payday Alternative Loans (PALs) rule; NCUA approves additional payday loan alternative (PAL II); Okinus: Consumer FAQs

Who an installment loan fits

• A known, one-time cost

  A car repair, a medical bill or moving costs, where you know roughly how much you need.

• Steady budget

  You can fit the same payment into your budget every month until it’s paid off.

• Simpler payments

  You want one fixed payment instead of several balances, and the total costs less than what you pay now. Debt consolidation.

• Building history

  Many lenders report payments to credit bureaus, so on-time payments may help your credit over time.

What to check before you accept

1. The APR and the total of payments. Compare both across every offer you get.
2. Fees. Look for origination fees, late fees and returned-payment fees.
3. Prepayment. Check whether paying early saves interest or triggers a penalty.
4. Payment method. Autopay is common. Know which account is drafted and when.
5. The lender’s name and licensing. Make sure you know who the lender is and that it can lend in your state.

Requesting loan options through this site

1. Choose an amount from $200 to $5,000 and complete the short form on our loan request page.
2. Your request is shared with lenders and lending partners who may make you an offer. Lenders may check your credit.
3. If you get an offer, review the lender’s APR, fees and terms. You don’t have to accept.

We are not a direct lender and don’t make credit decisions. Submitting a request doesn’t guarantee an offer, and loan amounts, rates and terms are set by each lender and depend on your state and profile.

Common questions