Definition:
An installment loan is a purchase in which the borrower pays back the loan in installments or payments over the term of the loan. In an installment loan, the number of payments are fixed, as opposed to revolving credit, in which the payments change with the balance (as with a credit card). An installment agreement defines the terms of the loans. The agreement must comply with the provisions of the Truth in Lending Act.
Some examples of installment plans include:
- The IRS provides taxpayers with the ability to pay their tax bill over time with an installment payment plan.
- Some employers allow employees to purchase specialized equipment or computer hardware/software over time, through the company, using an installment agreement to record tht terms of repayment.
