Installment vs. Revolving Payments
Installment Loan: A consumer loan in which the principal and interest are repaid on a regular (usually monthly) schedule. The payments are called "installments" and are all for the same amount.
Simple Interest: A method of calculating interest on outstanding balances that produces a declining finance charge with each payment of the installment loan; as principal declines so does the interest payment.
Amortization: The schedule of loan payments that establishes the amount of payment to be applied to the principal and the amount to be applied to interest, usually on a monthly basis, for the full term of the loan.
Set Term: You set the length of an installment loan. The loan will be completely paid off at that time, principal and interest.
Revolving Credit: Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Open lines of credit which are subject to variable payments in accordance with the balance.
Promotional Payments: Most manufacturers Revolving credit plans will have a promotional payment for a short term. Usually somewhere between $19 to $129 depending on the amount financed.
Promotional Interest: Revolving credit plans will have a lower interest rate for a short term and then the rate will increase to the standard rate.
Minimum Monthly Payment: After the promotional payments are over, the payment will be a minimum monthly payment on the account. This is usually a percent of the balance, for most it is 2.25%.
No Set Term: Revolving accounts do not have a set term, the payments are calculated by a percentage of the amount financed. If only the minimum payments are made, it will take a longer term to pay off the loan.