Installment Loan Examples: Compare Types, Terms & Uses

Have a large expense? What about a big goal? Installment loans can help you spread the cost over time and make everything feel more manageable! But what are installment loans and what are the different types? Let’s walk through the most common installment loan examples and explain the key differences between them.

Installment Loan Definition

An installment loan is a type of loan where you borrow a fixed amount of money upfront and pay it back over time. Unlike a credit card where your balance can fluctuate, an installment loan has a set loan term and predictable monthly payments. This consistency makes it easier for you to budget and plan your everyday finances.

The way installment loans work is pretty straightforward. When you take out a loan, you agree to make equal payment contributions (called “installments”) on a regular schedule, typically monthly. Each installment includes a portion that pays the principal (the amount you borrowed) and the interest (the cost of borrowing).

Comparing Secured vs. Unsecured Installment Loans

Most installment loans fall into two buckets: secured or unsecured. The difference comes down to collateral. To help you compare, keep these points in mind:

• Secured loans are backed by collateral (an asset like a car, home, business, or cash savings). If you are unable to repay the loan, the lender may be able to take that collateral to recover what you still owe.
• Unsecured loans simply don’t use collateral. Because the lender is taking on more risk, unsecured loans usually have stricter approval requirements or higher rates than secured loans.

Why does this matter? Secured loans can sometimes offer lower borrowing costs, but they carry the added risk of losing the asset you pledged. Either way, both secured and unsecured installment loans still have the same fixed-payment setup and payoff timeline.

Popular Installment Loan Examples

The types of installment loans you might encounter typically involve personal loans, auto loans, mortgage loans, student loans, and CD term loans. Here’s a breakdown of each:

1. Personal Loans

• Best For: Flexible needs, including unexpected bills, planned purchases, moving costs, or a one-time expense.
• How Personal Loans Work: They are typically unsecured, and you receive a lump sum upfront and repay the loan in fixed installments over a set period.
• Typical Term Length: Often a few months to several years, depending on the lender and loan amount.
• FYI: Watch out for fees (like origination fees) and the total amount you will repay. A loan with a lower monthly payment can still cost more overall once you add up all charges and fees.
• Helpful Tool: Compare Loans Calculator to pick the best lending option for you.

2. Auto Loans

• Best For: Buying a new/used vehicle or even refinancing an existing auto loan.
• How Auto Loans Work: The vehicle usually serves as collateral while you pay the loan in fixed installments.
• Typical Term Length: Several years (3 to 7).
• FYI: Longer loan terms may cost more over time and increase your chances of owing more than the car is worth.
• Helpful Tool: Auto Rebate vs. Low Interest Financing Calculator.

3. Mortgages

• Best For: Buying a home or refinancing a mortgage. These are usually the largest installment loans that most people will ever take in their lives.
• How Mortgages Work: The home is collateral for the loan, and you pay it back over an extended term with scheduled payments.
• Typical Term Length: Often 15 to 30 years, but it varies by loan product and the borrower’s financial profile.
• FYI: Stay aware of closing costs, if the mortgage rate is fixed or adjustable, and the long-term impact of repayment period on the total interest you pay.
• Helpful Tools: Mortgage Rate Comparison Calculator and Monthly Mortgage Payment Calculator.

4. Student Loans

• Best For: Paying for college, graduate school, or other educational expenses like tuition and books.
• How Student Loans Work: You borrow money to cover education and typically don’t start repaying until after graduating or leaving school. Federal student loans often have more flexible repayment options than private student loans.
• Typical Term Length: Usually 10 to 25 years, but it depends on the loan type and payoff plan you choose.
• FYI: Student loans can vary a lot by 1) interest rate type (fixed vs. variable), 2) whether interest builds while you are attending school, and 3) what available payoff plans are available. Federal loans may include options like income-driven repayment and loan forgiveness programs.
• Helpful Tool: Student Loan Calculator for consolidation and debt payoff.

5. CD Term Loans

• Best For: When you need cash but don’t want to break a certificate of deposit account early (and trigger early withdrawal penalties.
• How CD Term Loans Work: You borrow against your existing CD, using it as collateral. Then you repay in installments, which lets you keep your CD intact while it continues to earn interest.
• Typical Term Length: Often tied to the CD maturity date, meaning your loan must fully be repaid by the time your CD reaches its term.
• FYI: If you don’t repay as agreed, the lender can take your existing certificate of deposit to pay off what you still owe.
• Helpful Tool: CD Interest Calculator to find out how much you can earn.

*Other Types of Installment Loans*

Depending on your goals—and what your lender offers—other installment loans can include:

• Business Loans: For funding startup costs, equipment, or business expansion.
• Debt Consolidation Loans: Combining multiple debts into one monthly payment.
• Medical Loans: Financing healthcare expenses that aren’t covered by insurance.
• Construction Loans: Funding renovation projects or home building or in stages.
• Home Equity Loans: Borrow against the equity you have built in your home, using your property as collateral.
• Boat/RV Loans: Pay for recreational vehicles, structured similarly to auto loans.

How Academy Bank Supports Your Lending Goals

Installment loans make it easier to handle life’s unexpected costs and big financial needs with predictable monthly contributions you can count on. At Academy Bank, we keep things straightforward while offering personalized installment loan options:

• EXPRESS LOAN: A flexible personal loan for all kinds of needs—medical bills, debt consolidation, emergency costs, or whatever else comes up.
• MORTGAGES: Whether you are buying your first home or your forever home, we have you covered.
• CD TERM LOAN: Need cash now but don’t want to break your CD early? Borrow against it and keep those interest earnings rolling in!
• BUSINESS LOANS: If you are growing your company, explore options like business term loans, C&I loans, SBA small business loans, and more.

Ready to get started? We are here to help you find the right fit for whatever you are planning!