What type of loan typically involves fixed monthly payments?

An installment loan is designed to involve fixed monthly payments, making it a reliable option for borrowers who prefer predictable budgeting. This type of loan is typically repaid in a series of equal installments over a set period, which can range from a few months to several years. The borrower receives a lump sum upfront and then pays back that amount along with interest in fixed payments over the life of the loan.

Several other loan types do not offer fixed monthly payments. For example, a revolving credit line gives borrowers ongoing access to funds, where they can borrow up to a certain limit and make variable payments according to their usage. In contrast, a secured loan often has fixed terms similar to an installment loan but relies on collateral, making it a different structure. Finally, a payday loan usually involves a short repayment term and can include a lump sum payment that is significantly larger than the original loan amount, often resulting in fluctuating payment amounts. Thus, the design and structure of an installment loan specifically allow for that characteristic of fixed monthly payments.