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Home » What is the difference between Instalment and loan?

What is the difference between Instalment and loan?

An installment loan shares similarities with a personal loan in that it’s repaid through fixed payments over a predetermined period. Unlike a personal loan, however, installment loans frequently necessitate collateral to secure them, such as a vehicle or property. This collateral serves as a form of protection for the lender, reducing the risk associated with lending money.

One significant aspect that sets installment loans apart from other forms of borrowing is the predictable nature of the repayment schedule. With each installment, borrowers know exactly how much they need to pay, making it easier to budget and plan their finances accordingly. This predictability can be advantageous for individuals seeking financial stability and looking to avoid surprises or fluctuations in their monthly expenses.

In contrast, a loan can encompass various forms of borrowing, including installment loans, but it is not limited to them. Loans can also include credit cards, lines of credit, or other types of financing that may not follow the same fixed payment structure as installment loans. Therefore, while all installment loans are loans, not all loans necessarily operate on an installment basis.

(Response: The difference between installment and loan lies in their repayment structure. An installment loan, a type of loan, involves fixed payments over a specified period, often secured with collateral. On the other hand, a loan is a broader term encompassing various borrowing methods, including installment loans, but not exclusively.)