 TITLE: What Is Installment Credit? CONTENT: How an Installment Loan Works\n-----------------------------\nWhen you take out an installment loan, you borrow a fixed sum of money and make monthly payments of a specific amount until the loan is paid off.\nAn installment loan can have a repayment period of months or years. Its interest rate could be fixed or variable, meaning it can go up or down in the future. Installment loans also may come with additional fees, such as origination or late fees. It's crucial to check the loan agreement carefully before taking out an installment loan to understand exactly how much you'll pay.\nTypical installment loans include:\n*   **Mortgage**: A mortgage is a loan used to buy a home. The home itself acts as collateral, so if you're unable to make payments, your lender could take possession of it. Mortgages generally come in 10-, 15- or 30-year terms, and will have either a fixed or adjustable interest rate. You'll also pay closing costs, fees and, potentially, private mortgage insurance if your down payment covers less than 20% of the purchase price of the home.\n*   **Car loan**: Like mortgages, car loans typically require a down payment. The more you put down, the smaller your installment loan will be. A car loan uses your vehicle as collateral, similar to a mortgage, meaning your car could be repossessed if you don't pay the loan as agreed. Car loan terms are typically 36 to 72 months, but longer terms are becoming increasingly common. As of the first quarter of 2019, 38% of new passenger vehicle loans had terms of 61 to 72 months, according to Experian data.\n*   **Personal loan**: A personal loan can be used for many purposes, including consolidating debt or financing a home renovation. Personal loans are unsecured, meaning they're not backed by collateral like mortgages or car loans are. As a result, their interest rates can be high—up to 36%—depending on your credit scores. You can generally take out a personal loan between $1,000 and $50,000, with repayment terms of two to five years. END