How is installment credit characterized?

Installment credit is defined by the requirement to repay borrowed funds through regular scheduled payments, typically in fixed amounts, over a predetermined period. This structure allows borrowers to know exactly how much they need to pay each month, including both principal and interest, leading to more effective budgeting and planning.

This repayment format is often associated with loans for large purchases, such as cars or home mortgages, where the total loan amount is divided into smaller, manageable payments. Each payment reduces the outstanding balance of the loan until it is fully paid off at the end of the term. This is in contrast to other forms of credit where payment structures can be more flexible or varied, making installment credit distinct for its predictability and structure.