What Is an Installment Loan?

An installment loan is a fixed amount of money that you receive in one lump sum and then repay in equal portions at regular intervals, which are known as installments. There are many different types of installment loans, from mortgages to personal loans. Some installment loans can only be used for one specific purpose, while others can be used for anything.

How Does an Installment Loan Work?

Installment loans can provide large loan amounts and repayment periods lasting decades, depending on the type of installment loan and the lender you choose.

You’ll generally need a credit score of at least 580 to get approved for a personal installment loan, but credit score requirements vary based on the type of installment loan. Additionally, loan providers will consider factors such as your debt-to-income ratio and employment status to determine your ability to repay the loan.

If approved, you’ll typically get a fixed interest rate, and the payment amounts will be the same throughout the life of the loan, which makes the loan manageable. A portion of each payment goes toward interest on the loan, and the rest is applied to the principal balance. You’ll continue to pay the monthly installments until the loan is fully paid off.

Payment information from your loan is reported to the major credit bureaus each month, so making your payments on time will boost your credit score. On the other hand, missed payments will hurt your credit score.

Learn more about how installment loans work.

Types of Installment Loans

• Personal loans: A personal loan is a type of loan that borrowers can use for just about anything, including debt consolidation, medical bills or even wedding costs. Personal loans are typically unsecured, but there are secured loans that require you to put something up as collateral.
• Mortgages: Otherwise known as home loans, mortgages are installment loans that are used to finance the purchase of a home. Mortgage loans are secured by the home, so the lender can seize your property if you can’t pay the loan back.
• Home equity loans: A home equity loan is a type of installment loan that allows homeowners to borrow against the equity they have built up in their property. Like a mortgage, the loan is secured by the borrower's home, and failure to repay the loan can result in the loss of the property.
• Auto loans: An auto loan is an installment loan that is used to purchase a vehicle. Auto loans are secured by the vehicle, so defaulting on the loan will result in the lender seizing your car.
• Student loans: Student loans are available to any student pursuing a post-secondary education, which includes colleges, universities and trade schools. Most student loans are guaranteed by the federal government, but you can also get them from private lenders.
• Credit-builder loans: A credit-builder loan is a unique type of loan that is designed for people with no credit or a low credit score. With a credit-builder loan, the lender holds money in a savings account or certificate of deposit and disburses the funds once the loan is fully paid off. The lender reports your payment information to the major credit bureaus each month, so making your payments on time helps to build your credit.

Bear in mind that each type of installment loan is a bit different, with unique fees, interest rates and other features. Learn more about the different types of installment loans.

Best Installment Loans in February 2026

To qualify for an installment loan with no origination fee, you need to have a credit score of at least 660. Check out our complete list of the best installment loans to learn more. WalletHub can also help you check if you’re pre-qualified for the best loans.

Pros and Cons of Installment Loans

Installment loans are a very common way to borrow, but they have both advantages and drawbacks.

Pros of Installment Loans

• Make it possible to pay off big purchases over time
• Have consistent monthly payments
• Cover a wide range of needs with different types of loans
• Can be paid off early, usually with no penalty

Cons of Installment Loans

• Only allow one-time borrowing, while revolving credit allows borrowing on demand
• May require collateral
• May charge fees, such as origination fees to open personal loans or mortgage closing costs
• Cost more in interest the longer they last

Upstart disclosure: Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($2,100), MA ($7,000).

The full range of available rates varies by state. A representative example of payment terms for an unsecured Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 19.60% and a 6.90% origination fee of $690, for an APR of 23.22%. In this example, the borrower will receive $9310 and will make 60 monthly payments of $264. APR is calculated based on 5-year rates offered in March 2025. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.

**SoFi Personal Loan Disclosure
Fixed rates from 7.74% APR to 35.49% APR. APR reflect the 0.25% autopay interest rate discount and a 0.25% SoFi Plus interest rate discount.

SoFi Platform personal loans are made either by SoFi Bank, N.A. or , Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. SoFi may receive compensation if you take out a loan originated by Cross River Bank. These rate ranges are current as of 02/04/26 and are subject to change without notice. Not all rates and amounts available in all states. See SoFi Personal Loan eligibility details at https://www.sofi.com/eligibility-criteria/#eligibility-personal. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors.

Loan amounts range from $5,000–$100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 9.99% of your loan amount for Cross River Bank originated loans which will be deducted from any loan proceeds you receive and for SoFi Bank originated loans have an origination fee of 0%-7%, will be deducted from any loan proceeds you receive.

Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.

SoFi Plus Discount: SoFi Plus members are eligible for an interest rate reduction of 0.25% on a Personal Loan. To be eligible for the discount, you must meet the SoFi Plus eligibility criteria within 31 days of the funding of your loan. For complete SoFi Plus eligibility, please see the SoFi Plus terms. When you enroll in SoFi Plus, the discount will lower the interest rate that applies to your loan only during periods in which you are enrolled in SoFi Plus. The discount will be removed during periods in which SoFi determines you are not enrolled in SoFi Plus. Each time your loan is re-amortized, your monthly payment amount will change based upon the interest rate that was in place. SoFi reserves the right to change or terminate this offer for unenrolled participants at any time. You are not required to enroll in SoFi Plus to be eligible for Loan approval.

Direct Deposit Discount: To be eligible to receive an additional (0.25%) interest rate reduction on your Personal Loan (your “Loan”), you must set up Direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A., or enroll in SoFi Plus by paying the SoFi Plus Subscription Fee, all within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled Direct Deposit to an eligible Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion, or during periods in which SoFi successfully receives payment of the SoFi Plus Subscription Fee. This discount will be lost during periods in which SoFi determines you have turned off Direct Deposit to your Checking and Savings account or in which you have not paid for the SoFi Plus Subscription Fee. You are not required to enroll in Direct Deposit or to pay the SoFi Plus Subscription Fee to receive a Loan.

Direct Pay: Terms and conditions apply. Offer good for personal loan customers with credit cards and personal loans in their name only and subject to lender approval. To receive the offer, you must: (1) register and/or apply through this landing page; (2) complete a loan application with SoFi within 90 days of your application submit date; (3) meet SoFi’s underwriting criteria; (4) apply 50% or more of your loan proceeds directly to your lenders/creditors. Once conditions are met and the loan has been disbursed, the interest rate shown in the Final Disclosure Statement will include an additional 0.25% rate discount. SoFi reserves the right to change or terminate the Direct Pay Rate Discount Program to unenrolled participants at any time with or without notice. It takes about 3 business days for your creditor/lender to receive payment after your loan is signed. You will be responsible for making all required payments to avoid credit card and other loan fees.

To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2024 was around $33K. Information current as of 02/04/26. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.