If you are availing any loan that you must pay back in equal amount every month, that includes principal and interest, for a specific period, then it is an installment loan. No matter whether it is a student loan or for a mortgage or it is a personal loan or auto loan if the characteristics of payment resemble the repayment pattern described above you can call it an installment loan. It is possible to avail installment loans for bad credit checks that help people with poor credit score to avail personal loans because lenders do not use the credit score to disqualify borrowers. All are welcome to avail personal loans including those with poor credit rating, but the interest they pay will be higher than those with good credit score. It is a way for lenders to cover the risks in approving unsecured installment loans for people with poor credit score.

Easy to budget

To be comfortable with your financial plans and implement it without any stress, it is important to have a budget for monthly expenses that includes the loan repayments you must make. For a stable budget, you must know the costs in advance, and these must be some fixed sum every month so that it is easy to allocate funds in advance. Installment loans are excellent for creating a stable budget because of the fixed monthly repayment that remains firm throughout the loan period. This is possible because the interest rate on installment loan remains fixed throughout the tenure of the loan.

With or without collateral

By looking at the types of loans mentioned earlier in this article you can understand that installment loans can belong to two categories – collateralized loans and non-collateralized loans. When you take an auto loan payable in equal installments, the lender will use the vehicle as collateral or security for granting the loan. Similarly, for home loans which is another type of installment loan, the home becomes the collateral for the loan.

In the case of personal loans, there is no such collateral required by lenders as they are ready to extend loans without asking for any security. Lenders work out the loan amount by considering the creditworthiness of borrowers by based on the credit score and the borrower's ability to pay back as ascertained by considering his or her income and assets. The interest rate applicable to non-collateralized loans is higher than that of collateralized loans to cover the risks of lenders.

Purpose of loan

For personal loans, no one will ever ask you the purpose of taking a loan, and there is no restriction in the way you utilize the money. You can spend the money in the way you want. However, for some types of installment loans like home loans or auto loans, the purpose of the loan is very specific, and you cannot spend the money on anything else.  These loans entail some amount of down payment that influences the loan amount and the period of the loan.

Depending on the type of loan, borrowers must bear some other kinds of fees like application processing fees, etc.