An installment loan is money you borrow once and repay in fixed, scheduled payments until the balance is zero. Mortgages, auto loans, student loans and personal loans all work this way. The payment is set on day one, so you know what leaves your account each month and when the loan ends.
One loan, one payment schedule, one end date. What it costs depends on the type of loan and your credit, so treat the Federal Reserve average above as a benchmark, not a quote.
Check before you sign Compare the APR, not the interest rate. The APR counts the fees, and federal law makes the lender show it to you before you commit.
Ready to borrow? See where to get an installment loan online
Below: how the payments work, the six types you will run into, what each costs at today’s average rates, how an installment loan differs from a credit card, and where to get one.
How an installment loan works
You get the full amount up front. You repay it over a fixed term in regular installments, almost always monthly. Each payment covers that month’s interest plus a slice of the principal, and more of it goes to principal as the balance falls.
Most installment loans carry a fixed rate, so the payment never changes. Adjustable-rate mortgages and some private student loans are the exceptions. With an adjustable mortgage, the Consumer Financial Protection Bureau (CFPB) warns, the payment “could go up a lot, even double.” Ask which kind you are getting.
Federal law calls this closed-end credit. Under the Truth in Lending Act (Regulation Z, 12 CFR 1026.18), the lender has to put these numbers in front of you before you commit:
- Amount financed. The amount of credit provided to you.
- Finance charge. The dollar amount the credit will cost you.
- Annual percentage rate (APR). The cost of your credit as a yearly rate.
- Total of payments. What you will have paid once every scheduled payment is made.
- Prepayment. Whether you owe a penalty for paying the loan off early.
A lender that will not show you those numbers is not one to borrow from.
Types of installment loans
Any loan with a set amount, a set schedule and an end date is an installment loan. These six are the ones you are most likely to meet.
| Type | Typical term | Secured? | What to watch |
|---|---|---|---|
| Personal loan | 2 to 7 years | Usually not | Origination fees and a wide APR range |
| Auto loan | Often 5 to 6 years | Yes, by the car | A longer term costs more interest and can leave you owing more than the car is worth |
| Mortgage | 15 or 30 years | Yes, by the home | An adjustable rate can raise the payment later |
| Student loan | Set by your repayment plan | No | Federal loans have fixed rates. Some private loans have variable rates |
| Buy now, pay later | Four payments, two weeks apart | No | Late fees, and payments may not be reported to the credit bureaus |
| Payday-style loan | Varies by lender and state | No, but the lender can usually debit your account | Payday-level pricing. Get the APR in writing |
Terms are from the Consumer Financial Protection Bureau, the Federal Reserve’s G.19 release (the average new car loan from a finance company ran 67 months in the second quarter of 2026) and the two personal loan lenders below, all read at this update.
Auto loans and mortgages are secured, which means the lender can take the car or the home if you stop paying. Secured loans tend to cost less: the Fed’s averages show 7.14% for a 60-month new car loan against 11.86% for a personal loan. Before you finance a car, read our tips on comparing auto loans.
Student loans split into federal and private. Federal loans have fixed rates and income-driven repayment plans, the CFPB notes, while some private loans have variable rates. If you need to go beyond federal aid, compare the best private student loan options.
Buy now, pay later is a short installment loan. The CFPB describes it as a purchase paid off in four or fewer payments, often four interest-free payments two weeks apart. Most plans charge late fees, and your payments may not be reported to the credit bureaus. See how the best buy now, pay later apps compare.
Payday-style installment loans cost the most
Storefront and online “no credit check” installment loans are a different animal. The CFPB says payday lenders typically charge $10 to $30 for every $100 borrowed. A two-week loan at $15 per $100 works out to an APR of almost 400%.
Some payday loans are set up to be repaid in installments over a longer period, the CFPB notes. More time does not make that pricing cheap. Get the APR and the total of payments in writing before you agree, and treat these loans, like car title loans, as a last resort.
If you belong to a federal credit union, ask about a payday alternative loan first. These run $200 to $1,000 over one to six months. The rate is capped at 28% APR and the application fee at $20, according to the NCUA’s MyCreditUnion.gov. You need to have been a member for at least one month.
MoreTypes of consumer loans available to you
What an installment loan costs
The price is the APR, and it depends on the type of loan and your credit. The Federal Reserve tracks what banks charge on average. These are its figures for the second quarter of 2026, the latest in its G.19 consumer credit release.
| Type of credit | Kind | Average rate |
|---|---|---|
| 24-month personal loan | Installment | 11.86% |
| 60-month new car loan | Installment | 7.14% |
| 72-month new car loan | Installment | 6.97% |
| Credit card balances | Revolving | 22.15% |
Commercial bank averages for the second quarter of 2026, from the Federal Reserve’s G.19 consumer credit release dated September 8, 2026. The Fed reports them as annual percentage rates. The card figure covers accounts that were charged interest.
Two things stand out. A bank personal loan averaged about half the rate on a credit card balance, which is why people use one to pay off cards. Read whether debt consolidation is a good idea before you move a balance.
And those are averages. Lenders price by credit profile, and the APR ranges they advertise run from single digits to the mid-30s. Your offer can land anywhere in that range.
Watch the origination fee
An origination fee comes out of the money you receive. It is not added on top. Upstart publishes an example that shows the effect on a $10,000, five-year loan.
| Upstart’s example | Amount |
|---|---|
| Loan amount | $10,000 |
| Origination fee | 8.15%, or $815 |
| Cash you receive | $9,185 |
| Interest rate | 19.08% |
| APR with the fee counted | 23.37% |
| Monthly payment | $261 for 60 months |
Upstart’s representative example for an unsecured personal loan, based on five-year rates it offered in June 2026. Your own rate and fee depend on your application.
You repay the full $10,000 plus interest, but only $9,185 reaches your account. Sixty payments of $261 add up to $15,660. The fee is why the APR sits more than four points above the interest rate, and why APR is the number to compare across offers.
Installment loan vs. revolving credit
Revolving credit is a line you can use, pay down and use again. Credit cards and HELOCs work this way. Federal rules define it as credit where the lender expects repeated transactions and the credit becomes available again as you repay. An installment loan is the opposite: one draw, one payoff schedule, done.
| Feature | Installment loan | Revolving credit |
|---|---|---|
| How you borrow | One lump sum | Draw as needed, up to a limit |
| Payments | Fixed amount on a set schedule | Change with the balance |
| End date | Yes, set on day one | No, the line stays open |
| Borrow again | Only with a new application | Yes, as you pay it down |
| Average bank rate | 11.86% on a 24-month personal loan | 22.15% on card balances charged interest |
| Examples | Mortgage, auto, student, personal | Credit cards, HELOCs, lines of credit |
Average rates are the Federal Reserve’s commercial bank figures for the second quarter of 2026.
The difference shows up in your credit score too. With cards, how much of your limit you use matters, and the CFPB’s guidance is to keep it at no more than 30% of your total credit limit. An installment loan has no limit to use up. What counts most there is paying on time.
How an installment loan affects your credit
FICO builds its score from five categories, and an installment loan touches every one of them.
| FICO category | Share of score | What an installment loan does |
|---|---|---|
| Payment history | 35% | Every on-time payment helps. A missed one hurts |
| Amounts owed | 30% | The balance counts as debt you owe |
| Length of credit history | 15% | A new loan is a new, young account |
| New credit | 10% | Applying adds a hard credit inquiry |
| Credit mix | 10% | Installment loans are one of the account types FICO looks at |
Category weights from myFICO, read at this update. FICO says the importance of each category can vary from person to person.
Checking a rate is different from applying. SoFi and Upstart both say a rate check is a soft inquiry that does not affect your score. The hard inquiry comes when you pick an offer and continue with the application.
Do not borrow only to build credit. If the score is the goal, start with the steps that cost nothing.
MoreHow to improve your credit score
When an installment loan makes sense
- You need a set amount for one purpose
- You want a fixed payment and an end date
- The APR beats what your cards charge
- You only need a few hundred dollars
- Your only offers are near the top of the APR range
- The payment will not fit for the full term
The commitment is the tradeoff. A five-year loan is 60 payments. Look at the total of payments the lender has to disclose, decide whether what the money buys is worth that figure, then sign or walk.
How to qualify for an installment loan
Lenders are checking one thing: whether you can repay. SoFi says lenders typically evaluate your credit score, income and debt-to-income ratio. Upstart says its model also looks at factors such as education and employment. These steps put you in the best position.
- Check your credit first. Know your score and fix errors on your reports before a lender sees them.
- Add up your monthly debt payments. Lenders compare them with your income, so paying down a card first can help.
- Check your rate at more than one lender. A rate check is a soft inquiry at both lenders below, so comparing does not touch your score.
- Compare the APR and the total of payments. The lowest monthly payment is often the longest, most expensive loan.
- Be ready to verify. The lender may ask you to confirm your identity, income or bank account before it funds the loan.
Installment loans for bad credit
A low score does not always shut you out, but it raises the price. SoFi says lower credit scores could affect your eligibility, terms or rate, and neither lender’s personal loan page lists a minimum score. Expect an APR near the top of the range and possibly an origination fee.
Watch for the advance-fee scam. The Federal Trade Commission’s warning signs include ads that promise credit regardless of your credit history and fees that are not disclosed before you apply. Legitimate lenders will not promise or guarantee a loan before you apply, the FTC says. Never pay a fee up front to “release” one.
Where to get an installment loan online
For $1,000 or more, an online personal loan is the installment loan most people can apply for from a phone. Both lenders below let you check a rate with a soft credit inquiry first. The amounts, APRs and fees are each lender’s own figures as of this update. They can change, so confirm them on the lender’s page before you apply.
SoFi
Best for larger loansWhy it is here SoFi lends the most of the two and requires no fees: no required origination fee, no late fees and no prepayment penalty. If you are new to SoFi and apply through its invite page, you get a $300 bonus after your loan funds.
- No required fees and no late fees
- Same-day funding for most borrowers
- $5,000 minimum loan
- Lowest rates need strong credit
SoFi’s page lists “Fixed rates from 6.99% APR to 35.49% APR,” a range that includes its 0.25% autopay discount and 0.25% member discount, and says its rates were current on the day of this update. SoFi says its APR reflects an origination fee of 0% to 7%, which is deducted from the loan proceeds, and that no origination fee is required. Lowest rates are reserved for the most creditworthy borrowers. Same-day funding applies when the loan is approved and signed by 5:30 PM ET on a business day, and SoFi does not guarantee it. The $300 bonus requires keeping the loan active and in good standing for at least 90 days and is not available to Vermont residents. Loans are originated by SoFi Bank, N.A., Member FDIC. See SoFi’s personal loan page for current rates and terms.
Upstart
Best for smaller loansWhy it is here Loans on Upstart’s marketplace start at $1,000, and its model looks at factors such as your education and employment, not only your credit score. Once approved, you could get funds sent in 24 hours or less.
- Loans from $1,000 in most states
- No prepayment fee or penalty
- An origination fee can come out of your loan
- Only 3 or 5 year terms
Upstart is not the lender. All loans on Upstart’s marketplace are made by regulated financial institutions. The full range of available rates varies by state, and the lowest rates are only available to the most qualified applicants. Representative example: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 19.08% and an 8.15% origination fee of $815, for an APR of 23.37%. In this example, the borrower will receive $9,185 and will make 60 monthly payments of $261. APR is calculated based on 5-year rates offered in June 2026. There is no down payment and no prepayment penalty. Minimum loan amounts vary by state: GA ($3,100), HI ($1,500), MA ($7,000). In June 2026, 65% of Upstart customers had the funds transfer initiated in 24 hours upon approval and signing the promissory note. Your loan amount and APR will be determined based on your credit, income and other information in your application. Not all applicants will be approved. See Upstart’s personal loan page for current rates and terms.
Rates, fees and terms are set by each lender and can change. Your rate depends on your application, and not everyone is approved.
Get a quote from your own bank or credit union too. Federal credit unions cannot charge more than 18% APR on most loans under the NCUA’s current ceiling, which runs through September 10, 2027. That is about half the top of the ranges above. Here is how private lenders compare with bank loans.
Need only a few hundred dollars? Neither lender goes that low. Upstart starts at $1,000 in most states and SoFi at $5,000. For a small, short gap, compare the best cash advance apps, and read what each one charges for subscriptions and instant transfers before you download.
Installment loan FAQs
SoFi lends $5,000 to $100,000, and Upstart lists loans from $1,000 to $75,000 on its marketplace. Both let you check a rate with a soft credit inquiry before you apply. Compare the APR and any origination fee, and get a quote from your own bank or credit union too.
Mortgages, auto loans, student loans and personal loans are the most common examples. Each gives you a set amount up front and a fixed schedule of payments. A credit card is not one, because you can keep borrowing against the same limit.
Yes. A personal loan is one type of installment loan: you get a lump sum and repay it in fixed monthly payments. The category also covers mortgages, auto loans, student loans and buy now, pay later plans.
Yes to both. Each is repaid in scheduled payments over a set term, and each is secured. The car backs an auto loan and the home backs a mortgage, so the lender can take it if you stop paying.
They can. Payment history is 35% of a FICO score and credit mix is 10%, according to myFICO, so paying on time every month helps. A missed payment hurts the same category. If building credit is your only goal, compare credit builder loans first.
Often, but it costs more. Expect an APR near the top of the lender’s range, a smaller amount and possibly an origination fee. Legitimate lenders will not promise a loan before you apply, the FTC says, so skip any offer that does or that asks for a fee up front. Here is how to get a personal loan with a credit score under 600.
Usually, and it saves interest because interest is charged on the balance you still owe. The lender has to tell you in the loan disclosure whether a prepayment penalty applies. SoFi and Upstart both say they do not charge one on personal loans.
At 11.86% APR, the Federal Reserve’s average for a 24-month bank personal loan in the second quarter of 2026, a $5,000 loan works out to about $235 a month for two years and about $641 in interest. A longer term lowers the payment and raises the total interest. Your own rate depends on your credit.
