Definition
A loan for a fixed amount repaid in equal scheduled payments over a set term: mortgages, auto loans, student loans, and personal loans. Each payment covers that period's interest plus some principal on an amortization schedule, and the loan ends on a known date. The opposite structure is revolving credit, like cards, where the balance and payment float.
Why it matters
Installment debt is the predictable kind: the payment never surprises you and the end date is on paper. Credit scoring also treats it more gently than revolving balances, and holding a mix of both types helps a score.
Example
A borrower takes a $15,000 personal loan at 9% for five years: $311 a month, every month, and payment 60 clears it. The same $15,000 on a credit card would carry a floating payment, a floating rate, and no built-in end.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.