An installment loan is a loan in which there are a set number of scheduled payments over time. Many different types of loans are installment loans, including mortgages and auto loans. A credit card may require a monthly minimum payment but it is not an installment loan.
Let’s say John took out a £5,700 installment loan to consolidate high-interest credit card debt. After a 4.75% administration fee, his amount financed was £5,400. With an APR of 29.95% and a 36 month term, he will pay back the loan in 36 regular monthly installment payments of £230.
In general, payday loans are for a shorter duration, have a higher interest rate, and are often paid back in a single lump sum payment on the borrower’s next payday. In contrast, an installment loan can last for many months and payments are evenly spread out over the term of the loan.