What is installment credit & how does it work?

Installment credit is a type of loan where you borrow a lump sum of money, which is paid back in fixed amounts—usually monthly—called installments. The repayment period can be several months to many years. Mortgages, auto loans and personal loans are all common types of installment credit.

What is the difference between revolving credit and installment credit?

Both allow you to finance purchases, but the terms and how you receive the money differ. Revolving credit allows you to borrow money up to a set credit limit, repay it and borrow again as needed. By contrast, installment credit lets you borrow one lump sum, which you pay back in scheduled payments until the loan is paid in full.

What is the difference between interest rate and installment credit?

Interest is a fee that the lender charges you for using their money. The interest rate is a percentage that tells you how much interest you pay per year. The higher the interest rate, the more you pay. Installment credit is when you borrow a fixed amount of money and agree to pay it back in equal monthly payments over a set period of time.